Quarter Report q1 2009

Matthews Asia Funds | First Quarter Report March 31, 2009 | matthewsasia.com

1QASIA GROWTH AND INCOME STRATEGIES

Matthews Asian Growth and Income Fund

Matthews Asia Pacific Equity Income Fund

ASIA GROWTH STRATEGIES

Matthews Asia Pacific Fund

Matthews Pacific Tiger Fund

Matthews China Fund

Matthews India Fund

Matthews Japan Fund

Matthews Korea Fund

ASIA SMALL COMPANY STRATEGY

Matthews Asia Small Companies Fund

ASIA SPECIALTY STRATEGY

Matthews Asian Technology Fund

Performance and ExpensesThrough March 31, 2009

1 year 5 years 10 yearsSince

Inception

Inception

Date

2008 Gross Annual

Operating Expenses

1 The Advisor has contractually agreed to waive fees and reimburse certain expenses for Matthews Asia Pacific Equity Income Fund to the extent needed to limit total operating expenses to 1.50% until October 31, 2009.

2 Actual Return, Not Annualized.

3 The Advisor has contractually agreed to waive Matthews Asia Small Companies Fund’s fees and reimburse expenses until April 30, 2012 to the extent needed to limit total annual operating expenses to 2.00%.

Investor Disclosure

Past Performance: All performance quoted in this report is past performance and is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the returns quoted. If certain of the Funds’ fees and expenses had not been waived, returns would have been lower. For the Funds’ most recent month-end performance, please call 800.789.ASIA (2742) or visit matthewsasia.com.

Investment Risk: Mutual fund shares are not deposits or obligations of, or guaranteed by, any depositary institution. Shares are not insured by the FDIC, Federal Reserve Board or any government agency and are subject to investment risks, including possible loss of principal amount invested. Investing in international markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. In addition, single-country and sector funds may be subject to a higher degree of market risk than diversified funds because of concentration in a specific industry, sector or geographic location. Investing in small and mid-size companies is more risky than investing in large companies as they may be more volatile and less liquid than larger companies. Please see the Funds’ prospectus and Statement of Additional Information for more risk disclosure.

Redemption Fee Policy

The Funds assess a redemption fee of 2.00% on the total redemption proceeds on most sales or exchanges of shares that take place within 90 calendar days after their purchase as part of the Funds’ efforts to discourage market timing activity. This fee is payable directly to the Funds. For purposes of determining whether the redemption fee applies, the shares that have been held longest will be redeemed first. The Funds may grant exemptions from the redemption fee in certain circumstances. For more information on this policy, please see the Funds’ prospectus.

ASIA GROWTH AND INCOME STRATEGIES

Matthews Asian Growth and Income Fund -30.48% 5.75% 13.74% 9.00% 9/12/94 1.16%

Matthews Asia Pacific Equity Income Fund -28.03% n.a. n.a. -4.79% 10/31/06 1.35%

After Contractual Fee Waiver 1.32%1


Matthews Asia Pacific Fund -37.79% -0.36% n.a. 2.05% 10/31/03 1.23%

Matthews Pacific Tiger Fund -40.49% 5.16% 11.67% 5.27% 9/12/94 1.12%

Matthews China Fund -31.83% 9.76% 16.53% 9.05% 2/19/98 1.23%

Matthews India Fund -56.64% n.a. n.a. -4.74% 10/31/05 1.29%

Matthews Japan Fund -38.67% -10.29% -2.92% 0.42% 12/31/98 1.23%

Matthews Korea Fund -46.42% 1.35% 10.07% 1.13% 1/3/95 1.27%


Matthews Asia Small Companies Fund n.a. n.a. n.a. -20.33%2 9/15/08 14.31%3

After Contractual Fee Waiver 2.00%3


Matthews Asian Technology Fund -43.00% -2.27% n.a. -7.33% 12/27/99 1.33%

Average Annual Total Returns

This report has been prepared for Matthews Asia Funds shareholders. It is not authorized for distribution to prospective investors unless accompanied or preceded by a current Matthews Asia Funds prospectus, which contains more complete information about the Funds’ investment objectives, risks and expenses. Additional copies of the prospectus may be obtained at matthewsasia.com. Please read the prospectus carefully before you invest or send money.

The views and opinions in this report were current as of March 31, 2009. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of a Fund’s future investment intent.

Statements of fact are from sources considered reliable, but neither the Funds nor the Investment Advisor makes any representation or guarantee as to their completeness or accuracy.

Matthews Asia Funds are distributed by:PFPC Distributors, Inc. | 760 Moore Road | King of Prussia, PA 19406

Contents

Message to Shareholders 2

Manager Commentaries, Fund Characteristics and Schedules of Investments:

ASIA GROWTH AND INCOME STRATEGIES Matthews Asian Growth and Income Fund 4Matthews Asia Pacific Equity Income Fund 9

ASIA GROWTH STRATEGIESMatthews Asia Pacific Fund 14Matthews Pacific Tiger Fund 17 Matthews China Fund 20Matthews India Fund 24Matthews Japan Fund 28Matthews Korea Fund 32

ASIA SMALL COMPANY STRATEGY Matthews Asia Small Companies Fund 36

ASIA SPECIALTY STRATEGY Matthews Asian Technology Fund 39

Notes to Schedules of Investments 42

2 MATTHEWS ASIA FUNDS

Dear Fellow Shareholders,

Odd as it may seem, the first quarter of 2009 was rela-tively calm in Asia. To be sure, share markets in the region were turbulent; riots in Thailand and Malaysia demonstrated how the current global downturn has exacerbated long-standing political tensions within the region. However, these events were overshadowed by the greater drama in Washington, D.C. As the vari-ous arms of the U.S. government exercised newfound authorities, markets everywhere gyrated on the ensuing deliberations—congressional debates over the national stimulus package; the administration’s attempts to define industrial policy; and the general furor over executive compensation and corporate performance. Some indus-tries received favored government financing; others were deemed too big to fail.

As this very public wrangling played out amid a fragile domestic economy, it had the surprising effect of high-lighting the relative stability of the Asian region. Asian financial markets slumped during the first two months of the year but finished March on a much stronger note. Shares that previously had been among the most depressed were those that rebounded most; industries such as energy and commodities performed well. Markets in China and Hong Kong lead the way, while Japan lagged. Amid this environment, some of the Funds fell behind their respective indices during the quarter. How-ever, over longer investment horizons, most of the Funds outperformed their benchmarks with the exception of some of the individual country funds.

In our view, the events of the first quarter have been instructive for those contemplating the future of asset allocation. Regardless of one’s political or philosophi-cal tendencies, the recent surge in direct government intervention in the economy has been startling. We assume such intervention will be short-lived and targeted to alleviate the worst aspects of the current downturn. However, we believe there will be at least one lasting implication: the distinction between “developed” and “emerging” markets has grown impossibly blurred.

Shades of Grey, Rather than Black or White

The terminology for “emerging markets” arose from investment models that attempted to categorize a variety of assets into different “classes.” Ideally, each asset class would add incremental benefit to an investor’s portfolio when included in the proper proportion. As these models incorporated more overseas investment, many labeled geographies as either “developed” or “emerging”—so as to clearly delineate those countries which could serve as relatively safe havens for investment, versus those that were more speculative in nature. At the time, countries

seemed to divide neatly between those that had rule of law, property rights, stable and convertible currencies, relative fiscal prudence and reasonably transparent regu-latory systems and those that did not. The “emerging” versus “developed” nomenclature rose to prominence; today, it has become a rule of thumb that frames alloca-tion decisions for billions of dollars.

Given our focus, we have a natural inclination to see the “emerging” versus “developed” distinction as somewhat artificial—especially the binary aspect of it. Our work in Asia shows that countries are at different stages of eco-nomic, political and social development. However, in our view such distinctions are better made on a spectrum, rather than a pass or fail grade. Present events cloud the distinction further: the prevailing fiscal and regulatory instability in many wealthier countries would ostensi-bly undermine their “developed” status. Meanwhile, some of the larger “emerging” markets have handled their economic and political affairs with an unexpected degree of discipline. The important lesson to draw from all of this is that investors should be wary of using a well-intentioned, but ultimately arbitrary, classification scheme as a substantial basis for investment decisions. Instead, consider differentiating markets on their own individual merits. Not all “emerging” markets enjoy the same stability or hold the same long-term promise; nor are all “developed” markets equally resilient. Whatever approach you adopt, make sure to “look under the hood” of your chosen investment model. To do so is the only way to ensure that you achieve the exposures you really want, rather than ending up with a portfolio with the right nomenclature but based on the wrong premises.

Blurring the Distinction

China is the country in Asia that is most likely to defy easy categorization as either “emerging” or “developed.” As we mentioned in the 2008 annual report, China’s progress as a nation is emblematic of the region as a whole; despite the current downturn, its economic leadership has continued through the first quarter. The economy has been somewhat soft—export-oriented industries have suffered with the collapse of demand in Western markets. However, domestic consumption, along with domestic investment and property markets, have all been surprisingly firm—and each of these are much larger contributors than exports to the country’s growth. Thus, China has enjoyed a degree of relative economic stability compared with most of the rest of the world, where activity is contracting.

Perhaps of greater note regarding China’s long-term development was its continued effort to reform its domestic marketplace. The first three months of this year saw China engage in a flurry of activity that would

Message to Shareholders from the Investment Advisor

matthewsasia.com | 800.789.ASIA 3

suggest that the country’s leadership remains commit-ted to market-based reforms and a stable social order. For instance, China announced further steps to implement a social safety net scheme, and to spend over US$120 billion on health care reform. Furthermore, in order to promote broader economic stability in the region, China extended tens of billions in currency swap arrange-ments with its trade partners in Asia. China is using its own currency, the yuan, to fill some of the vacuum left behind by the collapse of dollar-based capital markets—especially those that impacted short-term trade financ-ing in the region. Perhaps most intriguingly, China demonstrated that it is still interested in the growth of its own capital markets, despite the seeming failure of such markets elsewhere around the world. At the end of March, the local securities regulator announced plans to create a new “Growth Enterprise Market” where younger companies would find it easier to list their shares. In our view this was a relatively small but meaningful undertak-ing, as it demonstrates the country’s commitment to a market-based economy.

Currency Conundrum

Since the outset of the credit crisis, Asia’s currencies have weakened. Consequently, investors are once again asking a longstanding question: why don’t the Funds hedge more of their currency positions via derivatives?

While the Funds’ portfolio managers each have the authority to hedge currency positions at their discretion, they have historically made use of this authority only very rarely. However, the Funds will occasionally take up very short-dated currency hedges when settling certain transactions to moderate short-term fluctuations in the settlement process—in our view, this does not constitute a “structural” approach towards currency risk management.

We avoid using derivatives to hedge currencies in the portfolios for four main reasons. First, and foremost: in our experience, sustained currency hedging via deriva-tives is one of the most certain ways to destroy wealth. Even if properly executed, a hedge will tend to induce additional portfolio churn and related transaction costs. Meanwhile, if the wrong tactics are applied to the hedging process, the results can be far more disastrous. Certainly, there are instances where we believe it appro-priate to manage currency risk. However, rather than introduce the risk and cost of currency derivatives, we prefer to use portfolio diversification—we attempt to pair offsetting positions against each other. We believe this approach is more cost efficient and less prone to error over the long run.

The second reason we tend not to hedge currencies with derivatives is because of the practical difficulty of doing so. Outside of a handful of the most developed markets

in Asia (i.e., Japan and Australia), long-dated currency contracts are rare or non-existent, and invariably expen-sive. Third, we operate under the assumption that most clients allocate only a small portion of their assets to the Matthews Asia Funds. This being the case, we presume that the bulk of our clients would actually benefit from a bit of diversification in currencies outside the U.S. dollar, which the Funds can provide.

Lastly, on philosophical grounds we find it artificial to separate a company’s stock from the currency that it uses to denominate its financial statements. Modern financial theory suggests that investors can and should “unbundle” their currency decisions from security selection. However, it was this same sort of thinking that underpinned much of the derivatives that have collapsed as of late. We would acknowledge that such theory has some raw merit, but ultimately it is alien to our investment process. When we invest in stocks, our goal is to do so over an indefinite horizon. We do extensive research on the underlying company because we intend to invest in it for the long-term, not just make a trade in its stock. When you are buying a stock with the intent to hold it indefinitely, the notion that you could permanently separate a company’s fortunes from its underlying currency starts to look absurd. If the currency collapses, it is likely that the business conditions for the company have collapsed, too. Our research aims to develop an integrated view of a company, its stock, and the currency, and make a long-term decision that is based on the merits of each. For us to manage the currency risk separately would be a bit like buying a dream house—one you plan to live in for thirty years—but selling short the lot on which it is built. The value of the house, as well as the land, is ultimately intertwined with the future of the neighborhood. Our view of Asia is that it remains an attractive region in which to build wealth over the long term—this will likely be reflected in corporate profits and exchange rates.

As always, we are honored to serve as your Asia invest-ment specialists and we thank you for your investment in the Matthews Asia Funds.

Andrew T. FosterActing Chief Investment OfficerMatthews International Capital Management, LLC

Robert J. Horrocks, PhDDirector of ResearchMatthews International Capital Management, LLC



Portfolio Manager Commentary For the quarter ended March 31, 2009, the Matthews Asian Growth and Income Fund declined -2.00%, while its benchmark, the MSCI All Country Asia ex Japan Index, rose 0.66%.

The pronounced market volatility that characterized 2008 spilled over into the first months of 2009. Markets began the year by falling sharply, and they continued to do so through the end of February. The markets rallied in March and the Fund’s benchmark index finished the first quarter slightly higher than where it began the year. Amid such gyrations, the Fund’s performance exhibited less volatility, though it failed to keep pace with the Index’s move into positive territory at the end of March.

Our strategy at this juncture remains largely the same as in the prior quarter: we continue to focus our efforts on some of the region’s largest markets—especially China—where growth appears more resilient in spite of the global downturn. China-related stocks and convertible bonds generally saw substantial gains during the quarter. While valuations on such positions have increased accordingly, we have maintained our exposure to that market because of the seemingly sounder growth prospects there.

During the quarter, we built a limited number of positions in the common stocks of companies that would typically be deemed more “cyclical” in nature. We have done so not because we harbor a strong view that the broader economic cycle has turned. Rather our decision has been rooted in the individual merits of the holdings themselves. We have found a small number of stocks where the valuations were compelling, the balance sheets strong and the cash flows surprisingly resilient even during the current downturn. Some of these companies recently traded at substan-tially higher prices, only to have seen their shares crushed in the latter half of 2008. One such holding is Keppel Corporation, a diversified industrial company with large interests in ship building and marine engineering, including the construction of large offshore oil rigs. The business has seen a sharp deceleration in recent months, corresponding to the dual declines in economic activity and oil prices. However, we remain convinced of the company’s generous dividend yield, its secure cash flow and its strong dividend-paying capacity—even if the current downturn should persist. And if the cycle does turn earlier than expected, Keppel’s operating leverage may allow its profitability to improve amid a recovering market.

Though the Fund’s exposure to China has been relatively steady, and is in line with that of the benchmark, we made marginal shifts during the quarter in response to the rapidly changing market conditions. For example, we trimmed a bit of the large convertible bond position that we had built in the latter half of 2008. This may seem somewhat counterintuitive, as we have stressed in previous commentaries that the convertible bond universe presently has attractive valuation and credit characteris-tics. This remains true; and even better, some bonds have undergone restructurings or tender offers that have driven their prices substantially higher. We took advantage of the resulting improvement in valuations and liquidity to trim holdings in a small number of bonds where we had lingering concerns over the creditworthiness of the underlying issuer. We have by and large replaced this exposure with fixed-income securities—either high-grade corporate issuers, or low-grade sovereign (government) issuers.

As we look forward, we would suggest only the obvious: that over the near term, markets are likely to remain unsettled and growth forecasts uncertain. In this environment we would encourage a long-term investment horizon—one that will match the ongoing progress in the region’s economies, where we expect to see steadily rising levels of domestic consumption, strong savings rates and continued market-oriented reforms.

PORTFOLIO MANAGERS

Andrew T. Foster Lead Manager

Robert J. Horrocks, PhD Co-Manager

Note: Managers shown reflect changes effective April 29, 2009.

FuND FACTS

Ticker MACSX Inception Date 9/12/94 Assets $1.1 billion NAV $11.26 Total # of Positions 73

Fiscal Year 2008 Ratios Portfolio Turnover 25.16%1 Gross Expense Ratio 1.16%2

Benchmarks MSCI AC Asia ex Japan Index MSCI AC Far East ex Japan Index

Redemption Fee 2% within first 90 calendar days of purchase

OBJECTIvE

Long-term capital appreciation. The Fund also seeks to provide some current income.

STRATEGYUnder normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrowings for investment purposes, in dividend-paying equity securities and the convertible securities, of any duration or quality, of companies located in Asia.


1 The lesser of fiscal year 2008 long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.

2 Matthews Asia Funds does not charge 12b-1 fees.


PERFORMANCE AS OF MARCH 31, 2009Average Annual Total Returns

3 Months 1 Year 3 Years 5 Years 10 YearsInception

9/12/94

Matthews Asian Growth and Income Fund -2.00% -30.48% -2.05% 5.75% 13.74% 9.00%MSCI AC Asia ex Japan Index3 0.66% -43.86% -6.17% 3.97% 5.30% 0.05%4

MSCI AC Far East ex Japan Index3 0.88% -42.73% -5.75% 3.63% 4.98% -0.19%4

Lipper Pacific ex Japan Funds Category Average5 -1.22% -42.58% -6.29% 3.64% 7.17% 1.65%4

GROWTH OF A $10,000 INvESTMENT SINCE INCEPTION

Performance assumes reinvestment of all dividends and/or distributions before taxes. All performance quoted represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate with market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund’s fees and expenses had not been waived. For the Fund’s most recent month-end performance visit matthewsasia.com.

INCOME DISTRIBuTION HISTORYJune December Total

2008 24.82¢ 16.66¢ 41.48¢2007 21.51¢ 68.91¢ 90.42¢2006 21.89¢ 39.85¢ 61.74¢1994–2005 $1.88 $2.07 $3.95

30-DAY YIELD: 6.05%The 30-Day Yield represents net investment income earned by the Fund over the 30-day period ended 3/31/09, expressed as an annual percentage rate based on the Fund’s share price at the end of the 30-day period. The 30-Day Yield should be regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate.

Source: PNC Global Investment Servicing (U.S.) Inc.

DIvIDEND YIELD: 6.44%The dividend yield (trailing) for the portfolio is the weighted average sum of the dividend paid per share during the last 12 months divided by the current price. The annualized dividend yield for the Fund is for the equity-only portion of the portfolio. Please note that this is based on gross portfolio holdings and does not reflect the actual yield an investor in the Fund would receive. Past yields are no guarantee of future yields. Source: FactSet Research Systems

Note: This table does not include capital gains distributions.

Plotted monthly. The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on dividends, capital gain distributions or redemption of Fund shares. Values are in US$.

3 It is not possible to invest directly in an index. Source: Index data from Morgan Stanley Capital Management; total return calculations performed by PNC Global Investment Servicing (U.S.) Inc. Please see page 44 for index definitions.

4 Calculated from 8/31/94.

5 The Lipper Category Average does not reflect sales charges and is based on total return, including reinvestment of dividends and capital gains for the stated periods.

$35,054 Matthews Asian Growth and Income Fund

$10,070 MSCI AC Asia ex Japan Index3,4

$9,724 MSCI AC Far East ex Japan Index3,4

$12,995 Lipper Pacific ex Japan Funds Category Average4,5

9/94 3/97 3/00 3/03 3/06 3/09$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000



COuNTRY ALLOCATION (%)7

China/Hong Kong 37.5Singapore 9.7India 8.7Malaysia 8.6Taiwan 8.4South Korea 7.0Japan 5.2Thailand 3.7United Kingdom 2.3Indonesia 1.8Philippines 1.5Australia 1.4Vietnam 1.0Cash and Other Assets, Less Liabilities 3.2

SECTOR ALLOCATION (%)

Financials 24.2Telecommunication Services 17.0Consumer Discretionary 14.5Information Technology 12.1Industrials 10.9Utilities 6.0Consumer Staples 5.3Energy 3.0Health Care 2.5Materials 0.3Non-Classified 1.0Cash and Other Assets, Less Liabilities 3.2

BREAkDOWN BY SECuRITY TYPE (%)

Common Equities 61.1

Convertible Bonds8 32.1Preferred Equities 2.3Government Bonds 1.0Corporate Bonds 0.3Cash and Other Assets, Less Liabilities 3.2

MARkET CAP ExPOSuRE (%)9

Large Cap (over $5B) 35.0Mid Cap ($1B–$5B) 38.6Small Cap (under $1B) 22.2Non-Classified 1.0Cash and Other Assets, Less Liabilities 3.2

7 Australia, United Kingdom and Japan are not included in the MSCI All Country Asia ex Japan Index.

8 Convertible bonds are not included in the MSCI All Country Asia ex Japan Index.

9 Source: FactSet Research Systems. Percentage values in data are rounded to the nearest tenth of one percent; the values may not sum to 100% due to rounding.

TOP TEN HOLDINGS6

Security Type Country % of Net Assets

Hongkong Land CB 2005, Ltd., Cnv., 2.750%, 12/21/12 Convertible Bond China/Hong Kong 4.0%Taiwan Semiconductor Manufacturing Co., Ltd. Equity Taiwan 3.6%Cherating Capital, Ltd., Cnv., 2.000%, 07/05/12 Convertible Bond Malaysia 3.1%Rafflesia Capital, Ltd., Cnv., 1.250%, 10/04/11 Convertible Bond Malaysia 3.1%China Petroleum & Chemical Corp. (Sinopec), Cnv., 0.000%, 04/24/14 Convertible Bond China/Hong Kong 3.0%Reliance Communications, Ltd., Cnv., 0.000%, 05/10/11 Convertible Bond India 2.7%Yue Yuen Industrial Holdings, Ltd., Cnv., 0.000%, 11/17/11 Convertible Bond China/Hong Kong 2.5%CLP Holdings, Ltd. Equity China/Hong Kong 2.3%HSBC Holdings PLC Equity United Kingdom 2.3%PCCW, Ltd. Equity China/Hong Kong 2.3%% OF ASSETS IN TOP TEN 28.9%

6 Holdings may combine more than one security from same issuer and related depositary receipts.

March 31, 2009



Schedule of Investmentsa (unaudited)

COMMON EQuITIES: 61.1%

Shares value

CHINA/HONG kONG: 24.3%CLP Holdings, Ltd. 3,686,200 $25,328,067 PCCW, Ltd. 48,380,000 24,861,806 Hang Lung Properties, Ltd. 10,068,920 23,687,696 Television Broadcasts, Ltd. 6,792,000 21,724,664 VTech Holdings, Ltd. 4,596,300 17,756,250 Vitasoy International Holdings, Ltd. 41,197,000 17,619,853 Bank of Communications Co., Ltd. H Shares 25,020,000 17,360,412 Shandong Weigao Group Medical Polymer Co., Ltd. H Shares 9,272,000 16,504,159 ASM Pacific Technology, Ltd. 4,199,800 14,712,487 Hang Lung Group, Ltd. 4,683,000 14,263,855 HongKong Electric Holdings, Ltd. 2,243,000 13,326,530 Hang Seng Bank, Ltd. 1,295,900 13,078,309 Café de Coral Holdings, Ltd. 5,757,100 11,297,103 I-CABLE Communications, Ltd.† 129,832,000 8,878,146 Hong Kong & China Gas Co., Ltd. 5,321,490 8,388,333 Next Media, Ltd. 65,142,000 6,810,947 Giordano International, Ltd. 31,991,000 6,051,898 Other Investments 509,566 Total China/Hong kong 262,160,081

SINGAPORE: 9.0%Ascendas REIT 24,143,000 19,422,579 Keppel Corp., Ltd. 4,904,000 16,202,127Cerebos Pacific, Ltd. 7,640,000 12,265,672 Fraser and Neave, Ltd. 6,908,100 11,508,038 Parkway Holdings, Ltd. 13,793,093 10,535,041 Hong Leong Finance, Ltd. 7,052,000 8,418,250 Parkway Life REIT 12,213,110 6,110,867 Yellow Pages Singapore, Ltd. 6,423,000 702,474 Other Investments 11,380,424

Total Singapore 96,545,472

TAIWAN: 8.4%Taiwan Semiconductor Manufacturing

Co., Ltd. 23,394,469 35,228,588 Cathay Financial Holding Co., Ltd. 18,412,240 15,865,440 Cyberlink Corp. 3,873,889 14,296,482 President Chain Store Corp. 5,013,000 11,512,066 Chunghwa Telecom Co., Ltd. ADR 565,944 10,317,159 Taiwan Semiconductor Manufacturing

Co., Ltd. ADR 391,708 3,505,787

Total Taiwan 90,725,522

JAPAN: 5.2%Nippon Building Fund, Inc., REIT 2,393 20,682,637 Trend Micro, Inc. 684,000 19,539,574 Japan Real Estate Investment Corp., REIT 2,053 15,771,549 Total Japan 55,993,760

Shares value

THAILAND: 3.7%Advanced Info Service Public Co., Ltd. 8,633,000 $20,143,261 BEC World Public Co., Ltd. 30,652,500 16,081,243 Thai Reinsurance Public Co., Ltd. NVDR 25,672,800 3,200,188 Total Thailand 39,424,692

SOuTH kOREA: 3.5%SK Telecom Co., Ltd. ADR 1,091,733 16,867,275 Hana Financial Group, Inc. 879,139 13,394,834 Daehan City Gas Co., Ltd. 280,300 5,248,922 SK Telecom Co., Ltd. 19,253 2,678,020 Total South korea 38,189,051

uNITED kINGDOM: 2.3%HSBC Holdings PLC ADR 881,733 24,882,505 Total united kingdom 24,882,505

INDONESIA: 1.8%PT Telekomunikasi Indonesia ADR 753,200 19,357,240 Total Indonesia 19,357,240

PHILIPPINES: 1.5%Globe Telecom, Inc. 966,040 16,712,221 Total Philippines 16,712,221

AuSTRALIA: 1.4%AXA Asia Pacific Holdings, Ltd. 6,171,409 14,618,375 Total Australia 14,618,375

TOTAL COMMON EQuITIES 658,608,919 (Cost $824,343,829)

SOuTH kOREA: 2.3%Hyundai Motor Co., Ltd., Pfd. 566,280 7,682,617 Samsung Fire & Marine Insurance Co., Ltd., Pfd. 130,056 6,604,572 LG Household & Health Care, Ltd., Pfd. 200,290 6,241,566 Hyundai Motor Co., Ltd., 2nd Pfd. 305,760 4,609,178 Total South korea 25,137,933

PREFERRED EQuITIES: 2.3%

TOTAL PREFERRED EQuITIES 25,137,933 (Cost $20,416,125)

March 31, 2009



Schedule of Investmentsa (unaudited) (continued)

INTERNATIONAL DOLLAR BONDS: 33.4%

value

TOTAL INTERNATIONAL DOLLAR BONDS $359,701,049

(Cost $416,214,261)

TOTAL INvESTMENTS: 96.8% 1,043,447,901

(Cost $1,260,974,215d)

CASH AND OTHER ASSETS, LESS LIABILITIES: 3.2% 35,034,368

NET ASSETS: 100.0% $1,078,482,269

a Certain securities were fair valued under the discretion of the Board of Trustees (Note A).

b Face amount reflects principal in local currency.

c Variable rate security. The rate reflects the rate in effect at March 31, 2009.

d Cost of investments is $1,260,974,215 and net unrealized depreciation consists of:

Gross unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,311,651

Gross unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . . (277,837,965)

Net unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . $(217,526,314)

† Affiliated Issuer, as defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of this issuer)

ADR American Depositary Receipt

NVDR Non-voting Depositary Receipt

Cnv. Convertible

Pfd. Preferred

REIT Real Estate Investment Trust

See accompanying notes to schedules of investments.

This portfolio data should not be relied upon as a complete listing of this Fund’s hold-ings, as information on particular holdings may have been withheld if it was in the Fund’s interest to do so.

MALAYSIA: 8.6%Cherating Capital, Ltd., Cnv.

2.000%c, 07/05/12 34,000,000 33,745,000

Rafflesia Capital, Ltd., Cnv.1.250%c, 10/04/11 32,700,000 32,945,250

Paka Capital, Ltd., Cnv.0.000%, 03/12/13 15,800,000 14,220,000

YTL Power Finance Cayman, Ltd., Cnv.0.000%, 05/09/10 11,000,000 12,292,500

Total Malaysia 93,202,750

INDIA: 8.7%Reliance Communications, Ltd., Cnv. 0.000%, 05/10/11 32,915,000 29,458,925

Tata Motors, Ltd., Cnv. 1.000%, 04/27/11 25,149,000 18,201,588

Sintex Industries, Ltd., Cnv. 0.000%, 03/13/13 25,400,000 15,875,000

Financial Technologies India, Ltd., Cnv. 0.000%, 12/21/11 18,814,000 14,533,815

Rolta India, Ltd., Cnv. 0.000%, 06/29/12 22,116,000 10,670,970

Educomp Solutions, Ltd., Cnv. 0.000%, 07/26/12 5,915,000 4,761,575

Total India 93,501,873

SOuTH kOREA: 1.2%Other Investments 13,020,322

Total South korea 13,020,322

Face Amount value

CHINA/HONG kONG: 13.2%Hongkong Land CB 2005, Ltd., Cnv. 2.750%, 12/21/12 $45,700,000 $43,323,600

China Petroleum & Chemical Corp., (Sinopec), Cnv. 0.000%, 04/24/14 247,470,000b 32,080,804

Yue Yuen Industrial Holdings, Ltd., Cnv.0.000%, 11/17/11 203,300,000b 27,410,588

PB Issuer, Ltd., Cnv.3.300%, 02/01/13 17,750,000 14,932,188

FU JI Food and Catering ServicesHoldings, Ltd., Cnv.0.000%, 10/18/10 141,500,000b 12,630,970

Hengan International Group Co., Ltd., Cnv. 0.000%, 05/16/11 12,780,000b 2,698,762 Other Investments 9,086,000

Total China/Hong kong 142,162,912

March 31, 2009

vIETNAM: 1.0%Socialist Republic of Vietnam

6.880%, 01/15/16 11,011,000 10,221,842

Total vietnam 10,221,842

SINGAPORE: 0.7%Olam International, Ltd., Cnv. 1.2821%, 07/03/2013 6,630,000 7,591,350




Portfolio Manager Commentary For the quarter ended March 31, 2009, the Matthews Asia Pacific Equity Income Fund declined –5.80%, while its benchmark, the MSCI All Country Asia Pacific Index, declined –8.87%. In March, the Fund distributed a quarterly dividend of 10 cents per share.

Despite the fact that dividends in Asia Pacific have been under pressure as economic activity has slowed, overall the Fund’s holdings managed to deliver some growth in their dividend payments (based on the majority of Fund holdings that declared or paid a dividend in 2009). Dividend cuts, primarily within the Fund’s financial hold-ings, were more than offset by growing dividends at companies within the consumer staples, utilities and health care sectors.

The Fund’s Japanese holdings were the main detractors to performance during the quarter as the yen depreciated 8.4%, and most of the Fund’s holdings in Japan posted negative returns. The Fund’s underweight in Japan compared to the benchmark, how-ever, contributed to its relative outperformance. Portfolio holdings in the Philippines, Taiwan, Malaysia and Hong Kong helped Fund performance. Specifically, the Fund’s Taiwanese holdings within the information technology sector performed well as this sector exhibited positive returns globally.

On a company basis, the Fund’s largest holding, Taiwan Semiconductor Manufacturing Company (TSMC)—the world’s dominant manufacturer of outsourced semiconduc-tors—was one of the primary contributors to Fund performance. TSMC faced strong headwinds during the past year as global demand for consumer electronics slowed, resulting in lower profitability. Countering the drawback of the inherent cyclicality of TSMC’s business is its dominant 50% market share, as well as the stability of its dividend. Importantly, TSMC has indicated its willingness to pay dividends by lobby-ing Taiwanese policy makers to give companies greater flexibility in paying dividends, allowing businesses with fluctuating earnings to maintain a stable dividend.

Broadly speaking, companies are more often evaluated on the basis of their place of origin rather than their ability to pay growing dividends and their track record of doing so. This view has led U.S. income-oriented investors to focus almost exclusively on American dividend-paying companies. In the current environment, it has become painfully apparent that this singular focus has put the dividend income of many of those investors at risk. Seeing former dividend-paying stalwarts like General Electric, Citigroup and Pfizer slash their dividends should prompt income-oriented investors to question their assumptions regarding how and where in the world they invest for income—and more specifically, long-term growth in income.

Asia Pacific has evolved into one of the more attractive regions in the world for investors seeking growing dividends. The universe of dividend-paying companies in Asia Pacific has expanded significantly during the past decade, making it possible to pursue a scalable dividend-investing strategy in the region. Dividend payments in Asia offer a diversified stream of income from companies in a wide range of industries operating in 14 different countries. This diversity was also reflected in the income derived by the Fund level: over the last 12 months, the main contributors to Fund income were found within the consumer discretionary, telecommunication services, financials and IT sectors—accounting for about 80% of total income. Since the Fund invests in companies within the same sector across the region, the income is further diversified geographically. Companies in Hong Kong, Japan and Taiwan accounted for 50% of the Fund’s income during the past year. Collecting dividends from companies in various sectors and localities enables the Fund to reduce its reliance on any one country or sector.

While financial markets remained volatile in the first quarter, our strategy of investing remains unchanged. We seek to invest in companies that we believe are attractively priced in relation to their potential to grow their dividend over time. For investors with this perspective, we believe the current environment offers opportunities to invest in companies with good prospects for dividend growth at attractive dividend yields.

PORTFOLIO MANAGERS

Jesper O. Madsen, CFA Lead Manager

Andrew T. Foster Co-Manager

FuND FACTS

Ticker MAPIX Inception Date 10/31/06 Assets $107.2 million NAV $8.01 Total # of Positions 48

Fiscal Year 2008 Ratios Portfolio Turnover 25.07%1 Gross Expense Ratio 1.35%After Contractual

Fee Waiver 1.32%2

Benchmark MSCI AC Asia Pacific Index


OBJECTIvE

Total return with an emphasis on providing current income.

STRATEGY

Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrowings for investment purposes, in income-paying publicly traded common stock, preferred stocks, convertible preferred stock and other equity-related instruments of compa-nies located in the Asia Pacific region.



2 The Advisor has contractually agreed to waive fees and expenses to the extent needed to limit total annual operating expenses to 1.50% until October 31, 2009.



3 Months 1 Year Inception 10/31/06

Matthews Asia Pacific Equity Income Fund -5.80% -28.03% -4.79%MSCI AC Asia Pacific Index3 -8.87% -40.25% -16.36%Lipper Pacific Region Funds Category Average4 -9.75% -43.01% -16.88%



$8,883 Matthews Asia Pacific Equity Income Fund

$6,494 MSCI AC Asia Pacific Index3

$6,429 Lipper Pacific Region Funds Category Average4

10/06 3/07 3/093/08

$6,000

$8,000

$10,000

$12,000

$14,000




INCOME DISTRIBuTION HISTORYQ1 Q2 Q3 Q4 Total

2009 10.06¢2008 5.86¢ 7.53¢ 11.43¢ 5.55¢ 30.37¢2007 — 10.30¢ — 17.12¢ 27.42¢2006 (Fund inception: 10/31/06) 1.97¢ 1.97¢

Note: This table does not include capital gains distributions. In March 2008, the Fund began to distribute investment income dividends on a quarterly rather than semi-annual basis. For additional details regarding Fund distributions, visit matthewsasia.com.

30-DAY YIELD: 3.97% The 30-Day Yield represents net investment income earned by the Fund over the 30-day period ended 3/31/09, expressed as an annual percentage rate based on the Fund’s share price at the end of the 30-day period. The 30-Day Yield should be regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate.

Source: PNC Global Investment Servicing (U.S.) Inc.

DIvIDEND YIELD: 5.87%The dividend yield (trailing) for the portfolio is the weighted average sum of the dividend paid per share during the last 12 months divided by the current price. The annualized dividend yield for the Fund is for the equity-only portion of the portfolio. Please note that this is based on gross portfolio holdings and does not reflect the actual yield an investor in the Fund would receive. Past yields are no guarantee of future yields. Source: FactSet Research Systems.

Matthews Asia Pacific Equity Income Fund March 31, 2009


COuNTRY ALLOCATION (%)6

China/Hong Kong 20.5Japan 20.2Taiwan 13.6Thailand 7.8Singapore 7.5Australia 7.1Malaysia 6.3South Korea 4.4Philippines 4.2Indonesia 3.9United Kingdom 2.4Cash and Other Assets, Less Liabilities 2.1


Telecommunication Services 18.4Financials 17.4Information Technology 17.3Consumer Discretionary 16.2Consumer Staples 12.4Utilities 5.9Industrials 5.2Health Care 5.1Cash and Other Assets, Less Liabilities 2.1


Large Cap (over $5B) 35.2Mid Cap ($1B–$5B) 28.7Small Cap (under $1B) 34.0Cash and Other Assets, Less Liabilities 2.1

TOP TEN HOLDINGS5

Country % of Net Assets

Taiwan Semiconductor Manufacturing Co., Ltd. Taiwan 5.5%SK Telecom Co., Ltd. South Korea 4.4%Globe Telecom, Inc. Philippines 4.2%PT Telekomunikasi Indonesia Indonesia 3.9%Top Glove Corp. BHD Malaysia 3.6%Chunghwa Telecom Co., Ltd. Taiwan 3.5%Minth Group, Ltd. China/Hong Kong 2.8%Lawson, Inc. Japan 2.6%Coca-Cola Amatil, Ltd. Australia 2.6%Nintendo Co., Ltd. Japan 2.6%% OF ASSETS IN TOP TEN 35.7%



6 The United Kingdom is not included in the MSCI All Country Asia Pacific Index.

Matthews Asia Pacific Equity Income Fund March 31, 2009





Shares value

CHINA/HONG kONG: 20.5%Minth Group, Ltd. 6,233,000 $3,047,338 CLP Holdings, Ltd. 389,500 2,676,274 Television Broadcasts, Ltd. 772,000 2,469,293 Café de Coral Holdings, Ltd. 1,212,000 2,378,296 China Resources Enterprise, Ltd. 1,518,000 2,354,592 VTech Holdings, Ltd. 607,000 2,344,939 ASM Pacific Technology, Ltd. 610,100 2,137,266 Sa Sa International Holdings, Ltd. 6,780,000 2,108,279 Xinao Gas Holdings, Ltd. 1,832,000 1,844,695 Shenzhen International Holdings 13,642,500 624,701


JAPAN: 19.2%Lawson, Inc. 68,200 2,833,020 Nintendo Co., Ltd. 9,500 2,779,052 Fanuc, Ltd. 40,100 2,742,721 Shiseido Co., Ltd. 180,000 2,638,985 Monex Group, Inc. 10,794 2,626,197 United Urban Investment Corp., REIT 470 1,931,158 MID REIT, Inc. 1,124 1,922,518 Eisai Co., Ltd. 52,800 1,554,148 Benesse Corp. 40,800 1,502,905

Total Japan 20,530,704


Co., Ltd. 3,631,313 5,468,217 Cyberlink Corp. 728,343 2,687,930 Chunghwa Telecom Co., Ltd. 1,303,706 2,377,468 Taiwan Secom Co., Ltd. 1,627,000 2,216,652 Chunghwa Telecom Co., Ltd. ADR 75,179 1,370,513 Taiwan Semiconductor Manufacturing

Co., Ltd. ADR 50,339 450,534


THAILAND: 7.8%Advanced Info Service Public Co., Ltd. 1,115,600 2,603,014 Thai Beverage Public Co., Ltd. 17,461,000 2,011,973 Siam Makro Public Co., Ltd. 1,030,000 1,945,862 Thai Tap Water Supply Public Co., Ltd. 13,646,200 1,755,163 Total Thailand 8,316,012

AuSTRALIA: 7.1%Coca-Cola Amatil, Ltd. 469,730 2,830,766 AXA Asia Pacific Holdings, Ltd. 1,097,112 2,598,757

Billabong International, Ltd. 375,565 2,218,598

Total Australia 7,648,121

MALAYSIA: 6.3%Top Glove Corp. BHD 2,950,700 3,886,078 Public Bank BHD 749,600 1,554,350 Media Prima BHD 4,931,200 1,324,640 Total Malaysia 6,765,068

INDONESIA: 3.9%PT Telekomunikasi Indonesia ADR 92,900 2,387,530 PT Telekomunikasi Indonesia 2,766,000 1,805,176 Total Indonesia 4,192,706


Shares value

SINGAPORE: 5.8%Venture Corp., Ltd. 815,000 $2,702,936 CapitaRetail China Trust REIT 3,729,000 1,800,563 Parkway Life REIT 3,395,868 1,699,133 Total Singapore 6,202,632

SOuTH kOREA: 4.4%SK Telecom Co., Ltd. ADR 161,300 2,492,085 SK Telecom Co., Ltd. 15,616 2,172,127 Total South korea 4,664,212

PHILIPPINES: 4.2%Globe Telecom, Inc. 257,560 4,455,716 Total Philippines 4,455,716

uNITED kINGDOM: 2.3%HSBC Holdings PLC ADR 53,691 1,515,160 HSBC Holdings PLC 180,800 997,762 Total united kingdom 2,512,922

March 31, 2009


JAPAN: 1.0%Ito En, Ltd., Pfd. 122,600 1,069,594


uNITED kINGDOM: 0.1%HSBC Holdings PLC, expires 04/03/09 75,333 140,935

Total united kingdom 140,935

RIGHTS: 0.1%

TOTAL RIGHTS 140,935 (Cost $0)





TOTAL INTERNATIONAL DOLLAR BONDS 1,826,983

(Cost $1,591,211)

TOTAL INvESTMENTS: 97.9% 104,882,592

(Cost $114,137,446c)


NET ASSETS: 100.0% $107,159,621


b Face amount reflects principal in local currency.

c Cost of investments is $114,137,446 and net unrealized depreciation consists of:



Net unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9,254,854)


BHD Berhad

Cnv. Convertible

Pfd. Preferred



Face Amount value

SINGAPORE: 1.7%CapitaCommerical Trust, Cnv. 2.000%, 05/06/13 3,000,000b $1,826,983



March 31, 2009



Portfolio Manager Commentary For the quarter ended March 31, 2009, the Matthews Asia Pacific Fund fell -9.47%, while its benchmark, the MSCI All Country Asia Pacific Index, declined -8.87%. Although all eyes were on the U.S. for a general indication of the market’s direction, each Asian stock market performed rather differently: China, Taiwan, Philippines and Indonesia posted positive returns for the quarter, whereas Japan, Singapore and Malaysia ended the quarter in negative territory. Global cyclical sectors, including automotive, information technology and energy, bounced back strongly from extremely depressed levels, while defensive sectors generally underperformed.

For the quarter, the Fund’s performance benefited most from its exposure to broad-based Chinese consumer cyclicals: auto, property, leisure and information technology service companies. Korean cyclical companies that were added to the portfolio during the quarter also helped Fund performance, even though the Korean market was relatively weak. Conversely, the Fund’s overweight position in financials detracted from performance. Specifically, investments in Japanese financial companies, including two J-REITs, were disappointing this quarter due to ongoing concerns over their ability to refinance their short-term debt. We believe, however, that the outlook for J-REITs is positive. In addition to improving news flow surrounding the sector, excessive concerns over the refinancing of short-term debt quickly faded with the announcement of government initiatives scheduled to take effect on April 1.

Dongfeng Motor Group, the portfolio’s third largest holding, is an example of a Chinese cyclical that performed well for the quarter. We built the Fund’s position last year when the company’s stock was being massively oversold purely based on fear of a declining auto market in China. In actuality, auto sales in 2008 grew 7% to 9.4 million units, albeit at a slower pace than the 22% year-over-year increase posted in 2007. Dongfeng is one of the more interesting Chinese companies in that it has formed joint ventures with three global auto makers—Honda, Nissan and PSA Group—to manufacture cars for domestic Chinese consumption. Today, Dongfeng is one of the largest auto companies in China with a total annual capacity of 820,000 units; and the company plans to increase its capacity to one million units in 2009. We like Dongfeng not only because it is providing the appropriate-size cars (small/medium) for the Chinese market, but also because it is using the most advanced technologies in the world to produce its cars—technologies that Japan and France have used for years. In a meeting with the management of Nissan Motor of Japan, they informed us that Dongfeng is one of their most efficient auto plants anywhere in the world—including Japan.

This quarter we increased the Fund’s exposure to Korean companies, with the addition of Hyundai Motor (preferred shares), LG Electronics and POSCO. In addition to offering attractive valuations, our rationale behind adding these Korean names to the portfolio was twofold: first is a dramatic improvement in the cost structure of Korean manufacturers as compared to their Japanese competition; second is the unique positioning of Korean goods in the U.S. and Europe. Korea offers quality cars and consumer electronics without the Japanese “premium” price tag, which may appeal to savings-minded consumers around the globe today.

The Fund continues to take a long-term perspective and focuses on mid-cap growth companies throughout Asia Pacific. Although we are seeing some signs of recovery, particularly in the Chinese property market, we remain cautious going forward and expect more volatility in the region in the near term.

PORTFOLIO MANAGERS

Taizo Ishida Lead Manager

Sharat Shroff, CFA Co-Manager

FuND FACTS

Ticker MPACX Inception Date 10/31/03 Assets $143.6 million NAV $9.08 Total # of Positions 50


Benchmark MSCI AC Asia Pacific Index


OBJECTIvE

Long-term capital appreciation.

STRATEGYUnder normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrow-ings for investment purposes, in the common and preferred stocks of companies located in the Asia Pacific region. The Fund may also invest in the convertible securities, of any duration or quality, of Asia Pacific companies.






TOP TEN HOLDINGS5


Kingdee International Software Group Co., Ltd. China/Hong Kong 4.1%Sysmex Corp. Japan 3.6%Dongfeng Motor Group Co., Ltd. China/Hong Kong 3.4%Nintendo Co., Ltd. Japan 3.2%China Vanke Co., Ltd. China/Hong Kong 3.2%Benesse Corp. Japan 3.1%Pigeon Corp. Japan 3.1%China Life Insurance Co., Ltd. China/Hong Kong 3.0%Ctrip.com International, Ltd. China/Hong Kong 3.0%Kiwoom Securities Co., Ltd. South Korea 2.9%

% OF ASSETS IN TOP TEN 32.6%



PERFORMANCE AS OF MARCH 31, 2009


3 Months 1 Year 3 Years 5 YearsInception 10/31/03

Matthews Asia Pacific Fund -9.47% -37.79% -11.48% -0.36% 2.05%

MSCI AC Asia Pacific Index3 -8.87% -40.25% -12.77% -1.37% 1.70%

Lipper Pacific Region Funds Category Average4 -9.75% -43.01% -13.62% -1.21% 1.56%



3 It is not possible to invest directly in an index. Source: Index data from Morgan Stanley Capital Management; total return calculations performed by PNC Global Investment Servicing (U.S.) Inc. Please see page 44 for index definition.


$11,164 Matthews Asia Pacific Fund

$10,941 MSCI AC Asia Pacific Index3

$10,923 Lipper Pacific Region Funds Category Average4

10/03 3/07 3/08 3/09$5,000

$10,000

$15,000

$20,000

$25,000

3/063/05

COuNTRY ALLOCATION (%)

Japan 34.1China/Hong Kong 31.5South Korea 10.3India 7.7Indonesia 4.6Australia 3.6Taiwan 2.9Singapore 1.4Thailand 1.4Cash and Other Assets,Less Liabilities 2.5


Financials 33.1Consumer Discretionary 15.5Information Technology 13.0Consumer Staples 11.2Industrials 10.6Health Care 7.8Telecommunication Services 4.4Materials 1.9Cash and Other Assets,Less Liabilities 2.5


Large Cap (over $5B) 34.0Mid Cap ($1B–$5B) 27.9Small Cap (under $1B) 35.6

Cash and Other Assets,Less Liabilities 2.5





Shares value

JAPAN: 34.1%Sysmex Corp. 161,700 $5,197,322 Nintendo Co., Ltd. 15,600 4,563,496 Benesse Corp. 121,900 4,490,298 Pigeon Corp. 179,000 4,479,809 Unicharm Petcare Corp. 139,400 3,537,391 Keyence Corp. 17,930 3,392,117 MID REIT, Inc. 1,903 3,254,939 Fanuc, Ltd. 47,500 3,248,858 Monex Group, Inc. 11,159 2,715,002 Mori Trust Sogo REIT, Inc. 377 2,689,185 GCA Savvian Group Corp. 1,751 2,107,529 Komatsu, Ltd. 188,700 2,088,298 Softbank Corp. 144,800 1,864,837 The Furukawa Electric Co., Ltd. 483,000 1,383,712 Shiseido Co., Ltd. 93,000 1,363,476 Takeda Pharmaceutical Co., Ltd. 32,200 1,117,165 Daibiru Corp. 89,000 717,367 Yahoo! Japan Corp. 2,588 681,518


CHINA/HONG kONG: 31.5%Kingdee International Software Group

Co., Ltd. 45,376,000 5,870,989 Dongfeng Motor Group Co., Ltd.

H Shares 9,504,000 4,910,933 China Vanke Co., Ltd. B Shares 4,339,987 4,538,676

China Life Insurance Co., Ltd. H Shares 1,294,000 4,255,982

Ctrip.com International, Ltd. ADR 155,100 4,249,740

Tingyi (Cayman Islands) Holding Corp. 3,408,000 3,944,433

China South Locomotive and RollingStock Corp., H Sharesb 8,334,900 3,807,727

Hang Lung Group, Ltd. 1,130,000 3,441,844 Dairy Farm International Holdings, Ltd. 615,954 2,723,197 China Merchants Bank Co., Ltd. H Shares 1,459,500 2,542,950 Shangri-La Asia, Ltd. 2,178,000 2,473,517 Hong Kong Exchanges and Clearing, Ltd. 257,800 2,432,977


SOuTH kOREA: 9.0%Kiwoom Securities Co., Ltd. 127,076 4,208,010 POSCO 10,263 2,734,877 NHN Corp.b 20,470 2,255,514 Shinhan Financial Group Co., Ltd. 113,517 2,053,301 LG Electronics, Inc. 25,935 1,725,530


Shares value

INDONESIA: 4.6%PT Bank Rakyat Indonesia 6,988,500 $2,547,239 PT Astra International 1,981,500 2,452,790

PT Telekomunikasi Indonesia 2,571,000 1,677,913

Total Indonesia 6,677,942

AuSTRALIA: 3.6%CSL Australia, Ltd. 117,925 2,664,703 AXA Asia Pacific Holdings, Ltd. 1,030,663 2,441,358 Total Australia 5,106,061

TAIWAN: 2.9%Taiwan Secom Co., Ltd. 1,701,160 2,317,689 Taiwan Semiconductor Manufacturing Co., Ltd. 1,233,135 1,856,918


SINGAPORE: 1.4%Keppel Land, Ltd. 2,149,000 2,051,594 Total Singapore 2,051,594

THAILAND: 1.4%Siam Commercial Bank Public Co., Ltd. 1,264,400 1,943,037 Total Thailand 1,943,037

INDIA: 7.7%HDFC Bank, Ltd. 154,090 2,964,476 Bharti Airtel, Ltd.b 226,410 2,801,990 Jain Irrigation Systems, Ltd. 352,960 2,378,383 Sun Pharmaceutical Industries, Ltd. 103,087 2,261,785 HDFC Bank, Ltd. ADR 9,700 591,021



(Cost $159,924,909c)


NET ASSETS: 100.0% $143,560,436


b Non–income producing security.






Pfd. Preferred



March 31, 2009



SOuTH kOREA: 1.3%Hyundai Motor Co., Ltd. Pfd. 139,860 1,897,455





Portfolio Manager Commentary For the quarter ended March 31, 2009, the Matthews Pacific Tiger Fund fell -2.81%, while its benchmark, the MSCI AC Asia ex Japan Index, gained 0.66%. Equity markets across Asia were extremely weak early in the quarter, but recovered some of their losses in March. One of the key factors driving the recovery in capital markets was improving sentiment regarding the global economy.

The Fund’s holdings in Hong Kong and China were buoyed by early signs that the economic measures announced by the Chinese government are gaining traction. However, the positive contributions from the Fund’s Chinese & Hong Kong positions were completely offset by substantial weakness in some of the portfolio’s mid-sized Indian companies. This weakness came after the discovery of corporate fraud at one of India’s largest IT services companies, which led to India’s smaller and mid-sized companies finding themselves under heavy scrutiny by investors. We took advantage of the sell-off to raise the allocation in these names since, in our view, the fundamental growth story remains intact. In addition, the Fund’s limited allocation to stocks in the energy and basic materials sectors—which rallied in the wake of rising commodity prices—further detracted from its relative performance.

Following the concerted efforts by governments across the region, there were some signs of stabilization in business fundamentals during the quarter. The strongest evidence came from China where there were early signs of recovery in consumer demand in real estate, automobiles and other discretionary sectors, helped by a surge in bank lending and direct subsidies from the Chinese government. The gov-ernment’s thrust on developing the country’s social infrastructure is encouraging, as it will help balance China’s growth engine by boosting domestic consumption over the next several years and reducing the country’s dependence on exports. The Chinese government has already announced plans to invest over US$120 billion in order to increase health care coverage from 30% of the population to 90% over the next few years.

With the exception of real estate holdings in China and Hong Kong, the perfor-mance of the Fund’s financial stocks was mixed. The Fund’s Indian bank holdings were weak during the quarter, reflecting investor concerns over a spike in non-performing loans, as well as the depreciation in the Indian rupee. We continue to add selectively to our financial holdings in India, recognizing that the steep yield curve is likely to help the lending business; in addition, there remains a sustained demand for wealth management services in the country. The Fund’s Korean finan-cials were helped by both the successful rollover of dollar-denominated debt, which had been a key challenge, and the prospect for moderating losses from currency-related derivatives.

It is important to highlight that in spite of a tough environment, most financial companies in Asia ex-Japan have not sought direct capital injections from their respective governments. When they need to recapitalize, banks are reaching out to the capital markets, underscoring the superior health of their balance sheets relative to their peers in the western world.

There is a risk that investors will overplay the potential outcomes of the stimulus measures underway in Asia. Asian households and companies remain in a good position to overcome the current turmoil, and while they may not pull the rest of the world out of its slump, they appear able to support growth domestically. The Pacific Tiger portfolio continues to be oriented towards consumption in Asia; however, we are also on the lookout for those Asian companies that are viewing the current crisis as an opportunity to gain global market share.

PORTFOLIO MANAGERS

Richard H. Gao Lead Manager

Sharat Shroff, CFA Lead Manager

Mark W. Headley Co-Manager

FuND FACTS

Ticker MAPTX Inception Date 9/12/94 Assets $1.1 billion NAV $10.74 Total # of Positions 60


Benchmarks MSCI AC Asia ex Japan Index MSCI AC Far East ex Japan Index


OBJECTIvE


STRATEGY

Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies located in Asia, excluding Japan.






TOP TEN HOLDINGS6


Dongfeng Motor Group Co., Ltd. China/Hong Kong 3.3%NHN Corp. South Korea 3.1%China Vanke Co., Ltd. China/Hong Kong 2.9%Tencent Holdings, Ltd. China/Hong Kong 2.9%Hang Lung Group, Ltd. China/Hong Kong 2.8%NWS Holdings, Ltd. China/Hong Kong 2.7%PT Bank Central Asia Indonesia 2.5%HDFC Bank, Ltd. India 2.5%PT Telekomunikasi Indonesia Indonesia 2.5%MegaStudy Co., Ltd. South Korea 2.4%% OF ASSETS IN TOP TEN 27.6%



9/12/94

Matthews Pacific Tiger Fund -2.81% -40.49% -6.18% 5.16% 11.67% 5.27%MSCI AC Asia ex Japan Index3 0.66% -43.86% -6.17% 3.97% 5.30% 0.05%4

MSCI AC Far East ex Japan Index3 0.88% -42.73% -5.75% 3.63% 4.98% -0.19%4

Lipper Pacific ex Japan Funds Category Average5 -1.22% -42.58% -6.29% 3.64% 7.17% 1.65%4






$21,101 Matthews Pacific Tiger Fund

$10,070 MSCI AC Asia ex Japan Index3,4

$9,724 MSCI AC Far East ex Japan Index3,4

$12,995 Lipper Pacific ex Japan Funds Category Average4,5

9/94 3/95 3/01 3/03 3/05 3/09

$0

$10,000

$20,000

$30,000

$40,000

$50,000

3/073/993/97


China/Hong Kong 38.7South Korea 16.9India 15.9Indonesia 6.6Taiwan 5.7Malaysia 5.1Singapore 4.5Thailand 3.6Philippines 0.9



Financials 29.2Consumer Discretionary 20.8Information Technology 14.6Health Care 10.5Consumer Staples 8.0Telecommunication Services 7.0Industrials 6.1Utilities 1.7











Shares value

CHINA/HONG kONG: 38.7%Dongfeng Motor Group Co., Ltd.

H Shares 74,128,000 $38,303,621 China Vanke Co., Ltd. B Shares 32,175,460 33,648,488 Tencent Holdings, Ltd. 4,474,800 33,111,735 Hang Lung Group, Ltd. 10,492,000 31,957,371 NWS Holdings, Ltd. 22,538,636 30,457,027 Ping An Insurance (Group) Co.

of China, Ltd. H Shares 4,566,000 27,180,876 Ctrip.com International, Ltd. ADR 965,075 26,443,055 Shangri-La Asia, Ltd. 21,336,000 24,230,925 New Oriental Education & Technology

Group, Inc. ADRb 442,400 22,230,600 Swire Pacific, Ltd. A Shares 3,284,500 21,903,925 China Resources Enterprise, Ltd. 13,150,000 20,397,156 Dairy Farm International Holdings, Ltd. 4,565,646 20,185,200 China Merchants Bank Co., Ltd. H Shares 11,084,500 19,313,004 China Mobile, Ltd. ADR 342,650 14,912,128 Lenovo Group, Ltd. 64,868,000 14,909,563 NetEase.com, Inc. ADRb 525,600 14,112,360 Mindray Medical International, Ltd. ADR 671,797 12,434,962 Hong Kong Exchanges and Clearing, Ltd. 1,164,800 10,992,753 China Yurun Food Group, Ltd. 7,743,000 9,891,181 Television Broadcasts, Ltd. 2,817,700 9,012,601 Glorious Sun Enterprises, Ltd. 37,822,000 8,540,400


SOuTH kOREA: 16.9%NHN Corp.b 327,802 36,119,290 MegaStudy Co., Ltd. 193,231 28,113,631 Samsung Securities Co., Ltd. 534,989 22,506,362 Amorepacific Corp. 49,134 21,760,555 Hanmi Pharmaceutical Co., Ltd. 184,959 20,125,168 Yuhan Corp. 147,692 19,809,809 S1 Korea Corp. 544,918 18,327,978 Hana Financial Group, Inc. 957,923 14,595,211 Hyundai Development Co. 541,382 13,312,807


Shares value

INDONESIA: 6.6%PT Bank Central Asia 109,025,000 $29,219,745

PT Telekomunikasi Indonesia 36,860,500 24,056,284

PT Astra International 14,665,230 18,153,284

PT Telekomunikasi Indonesia ADR 180,700 4,643,990



Co., Ltd. 18,381,362 27,679,595 President Chain Store Corp. 8,303,000 19,067,361 Hon Hai Precision Industry Co., Ltd. 8,405,950 19,020,978 Total Taiwan 65,767,934

SINGAPORE: 4.5%Hyflux, Ltd. 17,990,187 19,527,872 Parkway Holdings, Ltd. 25,444,540 19,434,312 Keppel Land, Ltd. 13,582,000 12,966,379 Total Singapore 51,928,563

THAILAND: 3.6%Advanced Info Service Public Co., Ltd. 6,347,300 14,810,068

Bank of Ayudhya Public Co., Ltd. NVDR 58,968,600 14,525,003 Land & Houses Public Co., Ltd. 144,102,800 12,171,703 Total Thailand 41,506,774

MALAYSIA: 5.1%Resorts World BHD 38,621,200 22,676,805 Public Bank BHD 9,234,337 19,148,063 Top Glove Corp. BHD 12,587,980 16,578,396 Total Malaysia 58,403,264

INDIA: 15.9%HDFC Bank, Ltd. 1,302,184 25,052,196 Infosys Technologies, Ltd. 883,401 23,159,996 Bharti Airtel, Ltd.b 1,776,740 21,988,462 Dabur India, Ltd. 11,030,888 21,625,989 Sun Pharmaceutical Industries, Ltd. 943,363 20,697,902 Kotak Mahindra Bank, Ltd. 2,787,941 15,581,472 Glenmark Pharmaceuticals, Ltd.b 3,670,757 11,414,116 Titan Industries, Ltd. 702,895 10,841,885 Sun TV Network, Ltd. 2,912,590 9,633,013 Sintex Industries, Ltd. 4,355,656 8,416,828 Unitech, Ltd. 10,200,000 7,058,829 HDFC Bank, Ltd. ADR 63,900 3,893,427 ICICI Bank, Ltd. ADR 226,800 3,014,172


PHILIPPINES: 0.9%SM Prime Holdings, Inc. 68,769,117 10,399,743 Total Philippines 10,399,743

March 31, 2009

TOTAL INvESTMENTS: 97.9% 1,125,297,610

(Cost $1,417,250,550c)


NET ASSETS: 100.0% $1,148,976,393



c Cost of investments is $1,417,250,550 and net unrealized depreciation consists of:

Gross unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . . $ 106,189,324

Gross unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . (398,142,264)

Net unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . $(291,952,940)


NVDR Non-voting Depositary Receipt

BHD Berhad



Matthews China Fund

Portfolio Manager Commentary For the quarter ended March 31, 2009, the Matthews China Fund gained 3.56%, outperforming the MSCI China Index, which rose 1.33%. Despite the still-negative outlook for the global economy, Chinese shares experienced a strong rebound in March amid initial signs of a recovery in the country’s domestic economy. The Fund’s overweight positions in the technology, consumer and financial sectors contributed to its outperformance for the quarter.

Trade activity declined sharply during the quarter and China’s economy contin-ues to be under pressure in export-related areas. This has most severely impacted export-related manufacturers, ports and shipping companies. On the domestic front, however, we are seeing some early signs of a recovery following the introduction of China’s massive US$590 billion stimulus plan late last year. Bank lending activities surged during the first three months of 2009—reaching historic highs. The govern-ment announced additional industries that will receive support; among them are auto, electronics and health care. Property prices have stabilized and transaction volumes have also started to pick up. The latest Purchasing Managers Index (PMI) showed that after six months’ of contraction, economic activity is expanding again. These positive signs in China’s domestic economy all contributed to the significant advance of Chinese equities in March.

For the quarter, the Fund benefited most from the sectors in which we have continued to focus: namely, information technology, consumer discretionary and financials. On a company basis, Dongfeng Motor Group, a leading auto manufacturer in China, was the largest contributor to Fund performance. Last year, the stock underperformed as a result of a slowdown in auto sales in China. However, we believe that the fundamentals of the company remain intact, and we increased our position when we saw its share price drop sharply last year. Our efforts paid off nicely during the quarter, as auto sales recovered strongly and the stock nearly doubled.

Conversely, holdings in the telecom services and utilities sectors detracted from Fund performance. Following the recent rollout of China’s 3G network, telecom services companies were hurt by uncertainty surrounding the earnings outlook for the sector; and the utilities sector experienced industry-wide losses as a result of surging coal prices.

The portfolio took a slightly more aggressive tack during the quarter as we expanded exposure to property, insurance and technology companies, and trimmed positions in utility companies. One new holding was added during the quarter: Hong Kong Exchanges and Clearing. The company, which operates the stock exchange, futures exchange and a related clearing house in Hong Kong, has a solid management team and a dominant market position. Going forward, we believe that it will benefit from an anticipated increase in securities trading activity.

While China is not immune to the current global financial crisis, the country’s economic fundamentals, especially with respect to the banking sector, are generally solid. A healthy banking sector enables China to facilitate and execute its stimulus program promptly and is one of the key reasons behind the country’s domestic recovery. The government has also made it clear that it will implement further stimulus programs in order to keep growth intact should it begin to deteriorate. In the months ahead, we expect to see more signs of recovery coming from areas related to China’s domestic consumption.

PORTFOLIO MANAGERS

Richard H. Gao Lead Manager


FuND FACTS

Ticker MCHFX Inception Date 2/19/98 Assets $855.4 million NAV $14.85 Total # of Positions 60


Benchmark MSCI China Index


OBJECTIvE


STRATEGY

Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies located in China. China includes its administrative and other districts, such as Hong Kong.







2/19/98

Matthews China Fund 3.56% -31.83% 7.28% 9.76% 16.53% 9.05%

MSCI China Index3 1.33% -34.71% 7.65% 13.85% 7.26% 0.07%4

Lipper China Region Funds Category Average5 0.30% -40.09% -0.24% 6.06% 10.16% 5.84%4



CHINA ExPOSuRE7

H Share 36.7%SAR (Hong Kong) 36.1%China-affiliated Corporations 11.1%B Share 5.0%Overseas Listed 9.4%Cash and Other Assets, Less Liabilities 1.7%

TOP TEN HOLDINGS6

Sector% of Net

Assets

Dongfeng Motor Group Co., Ltd. Consumer Discretionary 3.9%China Mobile, Ltd. Telecommunication Services 3.7%China Vanke Co., Ltd. Financials 3.4%Ping An Insurance (Group) Co. of China, Ltd. Financials 3.2%China Life Insurance Co., Ltd. Financials 3.0%Tencent Holdings, Ltd. Information Technology 2.7%Cheung Kong Infrastructure Holdings, Ltd. Utilities 2.7%China Communications Services Corp., Ltd. Telecommunication Services 2.5%New Oriental Education & Technology Group, Inc. Consumer Discretionary 2.4%NetEase.com, Inc. Information Technology 2.4%% OF ASSETS IN TOP TEN 29.9%

$26,172 Matthews China Fund

$10,078 MSCI China Index3,4

$19,220 Lipper China Region Funds Category Average4,5

2/98 3/01 3/03 3/05 3/07 3/09$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

3/99


Consumer Discretionary 22.3Financials 19.6Industrials 13.8Information Technology 13.4Utilities 8.4Consumer Staples 7.5Telecommunication Services 6.2Energy 4.9Materials 1.5Health Care 0.7Cash and Other Assets, Less Liabilities 1.7



Cash and Other Assets, Less Liabilities 1.7







7 SAR (Hong Kong) companies are companies that conduct business in Hong Kong and/or mainland China. H Shares are mainland China companies listed on the Hong Kong exchange but incorporated in mainland China. China-affiliated corporations (CAC), also known as “Red Chips,” are mainland China companies with partial state ownership listed in Hong Kong, and incorporated in Hong Kong. Overseas Listed (OL) companies are companies that conduct business in mainland China but listed in overseas markets such as Japan, Singapore, Taiwan and the United States. B Shares are mainland Chinese companies listed on the Shanghai and Shenzhen stock exchanges, available to both Chinese and non-Chinese investors.


Matthews China Fund


COMMON EQuITIES: CHINA/HONG kONG: 98.3%

Shares value

CONSuMER DISCRETIONARY: 22.3%Hotels, Restaurants & Leisure: 6.0%Café de Coral Holdings, Ltd. 10,448,100 $20,502,208 Shangri-La Asia, Ltd. 10,787,600 12,251,290 Ctrip.com International, Ltd. ADR 392,600 10,757,240 China Travel International Investment

HK, Ltd. 44,508,000 7,867,188

51,377,926

Automobiles: 3.9%Dongfeng Motor Group Co., Ltd.

H Shares 64,766,000 33,466,063 Distributors: 2.9%Li & Fung, Ltd. 5,471,200 12,826,180 China Resources Enterprise, Ltd. 7,906,000 12,263,111

25,089,291

Diversified Consumer Services: 2.4%New Oriental Education & Technology

Group, Inc. ADRb 411,800 20,692,950 Textiles, Apparel & Luxury Goods: 1.9%Ports Design, Ltd. 7,461,500 8,629,911 Glorious Sun Enterprises, Ltd. 33,994,000 7,676,018

16,305,929

Media: 1.5%Television Broadcasts, Ltd. 2,542,000 8,130,756 AirMedia Group, Inc. ADRb 1,021,400 4,279,666

12,410,422 Multiline Retail: 1.4%Golden Eagle Retail Group, Ltd. 17,779,000 11,692,579

Leisure Equipment & Products: 1.3%Li Ning Co., Ltd. 6,686,500 11,059,847

Specialty Retail: 1.0%Belle International Holdings, Ltd. 16,709,000 8,529,526

Total Consumer Discretionary 190,624,533

Shares value

INDuSTRIALS: 13.8%Transportation Infrastructure: 3.3%GZI Transport, Ltd. 36,765,000 $11,266,675 China Merchants Holdings International

Co., Ltd. 4,788,581 11,022,448 Beijing Capital International Airport Co.,

Ltd. H Shares 13,332,000 5,928,588

28,217,711

Construction & Engineering: 3.1%China Railway Construction Corp., Ltd.

H Sharesb 10,172,500 13,246,693 China Communications Construction

Co., Ltd. H Shares 11,809,000 12,958,899

26,205,592

Machinery: 2.8%Shanghai Zhenhua Port Machinery Co.,

Ltd. B Shares 15,250,873 14,224,337 China South Locomotive and Rolling

Stock Corp., H Sharesb 20,645,000 9,431,491 23,655,828

Electrical Equipment: 2.2%China High Speed Transmission

Equipment Group Co., Ltd. 13,216,000 18,888,953

Industrial Conglomerates: 1.7%

NWS Holdings, Ltd. 11,017,276 14,887,923

Airlines: 0.7%Air China, Ltd. H Shares 19,569,900 6,326,759

Total Industrials 118,182,766

INFORMATION TECHNOLOGY: 13.4%Internet Software & Services: 7.2%Tencent Holdings, Ltd. 3,155,200 23,347,221 NetEase.com, Inc. ADRb 765,400 20,550,990 Sina China Corp.b 761,700 17,709,525

61,607,736

Communications Equipment: 2.4%ZTE Corp. H Shares 4,981,120 20,303,606

Computers & Peripherals: 2.0%TPV Technology, Ltd. 31,868,000 9,752,720 Lenovo Group, Ltd. 30,336,000 6,972,568

16,725,288 Software: 1.8%Kingdee International Software Group

Co., Ltd.† 120,330,000 15,568,938

Total Information Technology 114,205,568

FINANCIALS: 19.6%Real Estate Management & Development: 7.1%China Vanke Co., Ltd. B Shares 27,482,318 28,740,489 Hang Lung Group, Ltd. 6,477,000 19,728,163 Swire Pacific, Ltd. A Shares 1,825,000 12,170,700

60,639,352 Insurance: 6.3%Ping An Insurance (Group) Co. of China,

Ltd. H Shares 4,619,500 27,499,356 China Life Insurance Co., Ltd. H Shares 7,882,000 25,923,993

53,423,349 Commercial Banks: 5.0%China Merchants Bank Co., Ltd. H Shares 8,132,500 14,169,607 China Construction Bank Corp. H Shares 20,082,000 11,400,133 Bank of Communications Co., Ltd. H Shares 14,808,000 10,274,699 BOC Hong Kong Holdings, Ltd. 7,107,500 7,279,347

43,123,786 Diversified Financial Services: 1.2%Hong Kong Exchanges and Clearing, Ltd. 1,124,300 10,610,536

Total Financials 167,797,023

March 31, 2009


Matthews China Fund


COMMON EQuITIES: CHINA/HONG kONG (continued)


(Cost $1,026,315,323c)


NET ASSETS: 100.0% $855,375,059



c Cost of investments is $1,026,315,323 and net unrealized depreciation consists of:




† Affiliated Issuer, as defined under the Investment Company Act of 1940 (ownership

of 5% or more of the outstanding voting securities of this issuer)



Shares value

uTILITIES: 8.4%Independent Power Producers & Energy Traders: 3.9%Huaneng Power International, Inc.

H Shares 20,674,000 $13,849,174 Datang International Power Generation

Co., Ltd. H Shares 30,990,000 13,600,410 Huaneng Power International, Inc. ADR 213,400 5,729,790

33,179,374

Electric utilities: 2.7%Cheung Kong Infrastructure Holdings, Ltd. 5,752,500 23,014,072

Gas utilities: 1.8%Hong Kong & China Gas Co., Ltd. 9,820,594 15,480,329

Total utilities 71,673,775

CONSuMER STAPLES: 7.5%Food Products: 4.3%Tingyi (Cayman Islands) Holding Corp. 17,291,000 20,012,672 China Yurun Food Group, Ltd. 13,213,000 16,878,753

36,891,425

Food & Staples Retailing: 1.7%Lianhua Supermarket Holdings Co., Ltd.

H Shares† 12,995,000 14,846,011 Beverages: 1.5%Tsingtao Brewery Co., Ltd. H Shares 5,727,000 12,421,258

Total Consumer Staples 64,158,694

TELECOMMuNICATION SERvICES: 6.2%Wireless Telecommunication Services: 3.7%China Mobile, Ltd. 2,120,083 18,467,864 China Mobile, Ltd. ADR 303,400 13,203,968

31,671,832

Diversified Telecommunication Services: 2.5%China Communications Services Corp.,

Ltd. H Shares 35,786,000 21,401,963

Total Telecommunication Services 53,073,795

ENERGY: 4.9%Oil, Gas & Consumable Fuels: 3.9%CNOOC, Ltd. 13,728,000 13,794,702 China Petroleum & Chemical Corp.

(Sinopec) H Shares 16,242,000 10,407,856 China Shenhua Energy Co., Ltd. H Shares 4,141,500 9,344,342

33,546,900

Energy Equipment & Services: 1.0%China Oilfield Services, Ltd. H Shares 10,266,000 8,136,090

Total Energy 41,682,990

Shares value

MATERIALS: 1.5%Construction Materials: 1.5%China National Building Material Co.,

Ltd. H Shares 8,606,000 $12,735,597

Total Materials 12,735,597

HEALTH CARE: 0.7%Health Care Equipment & Supplies: 0.7%Mindray Medical International, Ltd. ADR 342,468 6,339,083

Total Health Care 6,339,083

March 31, 2009


Matthews India Fund

Portfolio Manager Commentary For the quarter ended March 31, 2009, the Matthews India Fund returned -11.35% underperforming its benchmark, the Bombay Stock Exchange (BSE) 100 Index, which returned -4.79%. The Indian equity markets were rife with speculation and false rumors in the aftermath of one of the worst corporate scandals in India’s recent history. As a result, some of the mid-sized companies in the portfolios suffered and have yet to fully recover. Furthermore, the withdrawal of foreign institutional investors (FII’s) from India’s capital markets early in the quarter exaggerated the impact on smaller and mid-sized companies such that the BSE Small-Cap and BSE Mid-Cap Indices posted returns of -15.3% and -12.2%, respectively.

From its inception, the Matthews India Fund has placed significant emphasis on indentifying those entrepreneurs that we feel are capable of building robust business models to take advantage of the long-term growth opportunities in India. Our conviction and investment thesis surrounding several of these companies were tested in the current environment. With the exception of one instance where we exited a position due to funding risks, we remain confident about our investments and believe that the current crisis will provide some invaluable lessons for Indian companies. One of the Fund’s largest pharmaceutical holdings, Glenmark Pharmaceuticals, is learning the hard way to focus on cash flow and not just growth, and to manage investor perception about the company’s long-term outlook. The sharp decline in Glenmark’s share price in January was partly a reflection of a strained balance sheet, but more a consequence of the skittish environment surrounding mid caps in India. At these levels, Glenmark looked attractive and we added to our existing position.

Glenmark’s challenges underscore a key problem facing Indian companies—volatility in capital flows becomes exaggerated when risk aversion rises globally. The issue will be compounded if foreign investors continue to depart from India’s capital markets. Regulators are moving quickly to contain the fallout and improve the governance structure employed by Indian companies. Some important changes have already been initiated. In particular, the Securities and Exchange Board of India (SEBI) has mandated that every time a promoter pledges company shares as collateral, a disclosure must be made regarding the details of the transaction. SEBI has also tightened the norms surrounding the declaration of dividends, and is requiring more upfront money before warrants can be issued.

While the macro environment remained difficult, there were some early signs of stabilization. For example, during the quarter we saw an increase in the willingness of banks to start lending, albeit gradually. This change is providing some support to sectors like automobiles and real estate. Nonetheless, the risks to corporate earnings remain, and upcoming elections in April may cause some uncertainty among investors. In spite of a bit of recovery in stock prices late in the quarter, valuations remain attractive in our view, particularly for smaller and mid-sized companies. Our stance has been reinforced as these companies have announced an increasing number of share repurchases, and we have seen a pickup in insider buying. The focus of the portfolio is to take advantage of the recent sell-off, and maintain a significant presence among sectors like financials and industrials, both of which are vital to the long-term development of India’s economy.

PORTFOLIO MANAGERS

Sharat Shroff, CFA Lead Manager


Noor kamruddin Co-Manager

FuND FACTS

Ticker MINDX Inception Date 10/31/05 Assets $269.9 million NAV $7.42 Total # of Positions 49


Benchmark Bombay Stock Exchange (BSE) 100 Index


OBJECTIvE


STRATEGY

Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrow-ings for investment purposes, in publicly traded common stocks, preferred stocks and convertible securities of companies located in India.







3 Months 1 Year 3 YearsInception 10/31/05

Matthews India Fund -11.35% -56.64% -14.49% -4.74%Bombay Stock Exchange (BSE) 100 Index3 -4.79% -51.89% -8.52% 2.83%Lipper Emerging Markets Funds Category Average4 -1.83% -50.27% -10.87% -2.77%



TOP TEN HOLDINGS5

Sector % of Net Assets

HDFC Bank, Ltd. Financials 5.1%Bharti Airtel, Ltd. Telecommunication Services 4.8%Infosys Technologies, Ltd. Information Technology 4.8%Sun Pharmaceutical Industries, Ltd. Health Care 4.7%Dabur India, Ltd. Consumer Staples 4.6%Reliance Industries, Ltd. Energy 4.3%Gail India, Ltd. Utilities 3.8%Cipla India, Ltd. Health Care 3.2%Jain Irrigation Systems, Ltd. Industrials 3.2%Glenmark Pharmaceuticals, Ltd. Health Care 2.8%


$8,472 Matthews India Fund

$11,001 Bombay Stock Exchange (BSE) 100 Index3

$9,138 Lipper Emerging Markets Funds Category Average4

10/05 3/06 3/07 3/09$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

3/08


Financials 19.5Industrials 18.2Information Technology 12.8Health Care 10.7Consumer Discretionary 9.0Consumer Staples 7.6Telecommunication Services 7.1Utilities 6.4Energy 5.6Materials 1.1Cash and Other Assets, Less Liabilities 2.0









Matthews India Fund


COMMON EQuITIES: INDIA: 93.4%

Shares value

FINANCIALS: 19.5%Commercial Banks: 12.6%HDFC Bank, Ltd. ADR 150,727 $9,183,796 Oriental Bank of Commerce 2,946,834 6,425,831 Corporation Bank 1,719,331 6,136,685 Axis Bank, Ltd. 635,032 5,204,393 HDFC Bank, Ltd. 233,033 4,483,229 ICICI Bank, Ltd. ADR 180,100 2,393,529

33,827,463

Diversified Financial Services: 3.1%Kotak Mahindra Bank, Ltd. 1,200,000 6,706,658 SREI Infrastructure Finance, Ltd. 3,625,000 1,739,647

8,446,305 Comsumer Finance: 1.8%Shriram Transport Finance Co., Ltd. 1,342,977 4,898,828

Real Estate Management & Development: 1.4%

Unitech, Ltd. 5,380,260 3,723,366

Capital Markets: 0.6%IL&FS Investsmart, Ltd. 1,439,981 1,694,595


Shares value

HEALTH CARE: 10.7%Pharmaceuticals: 10.7%Sun Pharmaceutical Industries, Ltd. 577,260 $12,665,401 Cipla India, Ltd. 1,989,657 8,649,954 Glenmark Pharmaceuticals, Ltd.b 2,397,615 7,455,317


uTILITIES: 6.4%Gas utilities: 3.8%

Gail India, Ltd. 2,119,751 10,296,822

Electric utilities: 2.6%CESC, Ltd. 1,680,920 7,001,682

Total utilities 17,298,504

INDuSTRIALS: 18.2%Machinery: 6.6%Jain Irrigation Systems, Ltd. 1,266,127 8,531,661 Ashok Leyland, Ltd. 18,511,277 6,637,476 Thermax, Ltd. 785,000 2,804,752

17,973,889

Construction & Engineering: 2.4%Larsen & Toubro, Ltd. 481,660 6,391,021

Road & Rail: 2.3%Container Corp. of India, Ltd. 435,386 6,166,101

Building Products: 2.2%Sintex Industries, Ltd. 3,091,834 5,974,630

Electrical Equipment: 2.0%Crompton Greaves, Ltd. 2,205,000 5,399,654

Industrial Conglomerates: 1.6%MAX India, Ltd.b 2,238,102 4,360,066

Air Freight & Logistics: 1.1%Gati, Ltd. 3,606,339 2,867,467


INFORMATION TECHNOLOGY: 12.5%IT Services: 9.0%Infosys Technologies, Ltd. 298,281 7,819,990 HCL-Infosystems, Ltd. 4,319,485 6,487,390 Infosys Technologies, Ltd. ADR 188,179 5,011,207 Rolta India, Ltd. 4,367,164 4,957,205

24,275,792

Internet Software & Services: 1.8%Info Edge India, Ltd. 566,727 4,963,856

Software: 1.7%Financial Technologies India, Ltd. 369,855 4,528,997


CONSuMER DISCRETIONARY: 8.3%Media: 4.7%Sun TV Network, Ltd. 1,655,127 5,474,117 HT Media, Ltd. 3,152,688 3,635,415 Dish TV India, Ltd.b 4,737,097 2,248,101 Television Eighteen India, Ltd. 901,847 1,249,009

12,606,642

Auto Components: 1.3%Bharat Forge, Ltd. 1,822,459 3,525,397

Hotels, Restaurants & Leisure: 1.3%Indian Hotels Co., Ltd. 4,449,840 3,468,183

Textiles, Apparel & Luxury Goods: 1.0%Titan Industries, Ltd. 177,589 2,739,242


CONSuMER STAPLES: 6.3%Personal Products: 6.3%Dabur India, Ltd. 6,394,779 12,536,925 Marico, Ltd. 3,799,720 4,524,093 Total Consumer Staples 17,061,018

TELECOMMuNICATION SERvICES: 4.8%Wireless Telecommunication Services: 4.8%Bharti Airtel, Ltd.b 1,052,191 13,021,636


ENERGY: 5.6%Oil, Gas & Consumable Fuels: 5.6%Reliance Industries, Ltd. 387,871 11,685,441 Chennai Petroleum Corp., Ltd. 1,889,744 3,530,217


March 31, 2009

MATERIALS: 1.1%Chemicals: 1.1%Asian Paints, Ltd. 190,500 2,965,486


TOTAL COMMON EQuITIES: INDIA 252,164,468 (Cost $458,359,405)


Matthews India Fund



Face Amount value

TELECOMMuNICATION SERvICES: 2.3%Wireless Telecommunication Services: 2.3%Reliance Communications, Ltd., Cnv.

0.000%, 03/01/12 $4,500,000 $3,195,000

Reliance Communications, Ltd., Cnv.0.000%, 05/10/11 3,167,000 2,834,465


CONSuMER STAPLES: 1.3%

Beverages: 1.3%Radico Khaitan, Ltd., Cnv.

3.500%, 07/27/11 6,000,000 3,570,000


CONSuMER DISCRETIONARY: 0.7%Diversified Consumer Services: 0.7%Educomp Solutions, Ltd., Cnv.

0.000%, 07/26/12 2,500,000 2,012,500


INFORMATION TECHNOLOGY: 0.3%Software: 0.3%Financial Technologies India, Ltd., Cnv.

0.000%, 12/21/11 1,000,000 772,500

Total Information Technology 772,500

TOTAL INTERNATIONAL DOLLAR BONDS 12,384,465 (Cost $15,766,458)

value

TOTAL INvESTMENTS: 98.0% $264,548,933

(Cost $474,125,863c)


NET ASSETS: 100.0% $269,940,562








Cnv. Convertible


March 31, 2009


Matthews Japan Fund

Portfolio Manager Commentary For the quarter ended March 31, 2009, the Matthews Japan Fund fell -17.96%, while its benchmark, the MSCI Japan Index, declined -16.57%. The Japanese market, as measured by the Tokyo Stock Price Index (TOPIX), lost -17.26% for the quarter on continued concerns that the global economy is worsening. In addition, the yen depreciated 9% against the U.S. dollar—another negative factor for the quarter.

The Fund benefited most from its overweight in industrials and lack of exposure to the utilities sector, while its slight underweight in the consumer cyclical companies coupled with stock selection in that sector hurt performance. Over the quarter the market was led by global cyclical automotive, machinery and IT companies. The Fund’s overweight positions in the consumer staples and health care sectors were neutral for the quarter; rather, it was the Fund’s holdings in the telecom sector that were a drag on performance.

The Fund’s largest overweight continues to be J-REITs—the sector represented 13% of the portfolio at quarter-end. Our outlook for J-REITs is positive, especially following constructive talks by the Japanese government during the last few months. We believe that valuations in this sector remain compelling.

ITOCHU, the Fund’s second largest position, is an example of a company that we believe can grow in the next decade despite Japan’s anticipated environment of slow GDP growth. The company is already one of the country’s largest trading houses, and further growth should come from the expanding universe of Asian consumers. Unlike its competitors, ITOCHU generates a significant portion of its revenues and profits from the food segment. It has made steady inroads in the Chinese food market, and its recent purchase of 20% of China’s Ting Hsin Group—which owns Tingyi, China’s largest packaged food company—is another positive move to expand into the Chinese market. In addition, ITOCHU’s 31% stake in Japan’s FamilyMart—one of the largest convenience store chains in Japan—is also meaningful. FamilyMart now has more than 14,000 stores in Asia, approximately half of which are in Asia ex-Japan, and the company plans to add more locations in Asia ex-Japan next year.

During the quarter, we completed a significant repositioning of the portfolio that had begun late last year. The Fund is now concentrated in higher-conviction names—a change that we believe helped performance this quarter. Our conviction is based on our in-depth company analysis as well as a number of long-term investment themes we have identified in Japan, including: clean energy, factory automation, energy infrastructure, an aging society, wealth management and mergers and acquisitions. Over the quarter, we eliminated a number of the Fund’s defensive holdings including Secom, Takeda Pharmaceutical and East Japan Railway, adding companies that we believe are good long-term growth prospects such as Itochu, Furukawa Electric and Toshiba Machine. We also added positions in several depressed cyclical names in the auto and IT sectors because they were trading at attractive valuations. Lastly, we exited the portfolio’s smaller positions, resulting in a more focused portfolio.

At quarter-end, the Fund held 17 new names and a total of 54 positions, including 13 J-REITs. This shift was a significant one for the Fund, however, we believe it will add value for our shareholders over the long term. We do not anticipate further major changes to the Fund’s core holdings in the foreseeable future.

PORTFOLIO MANAGERS

Taizo Ishida Lead Manager

virgil Adams Co-Manager

FuND FACTS

Ticker MJFOX Inception Date 12/31/98 Assets $105.9 million NAV $8.36 Total # of Positions 54


Benchmarks MSCI Japan IndexTokyo Stock Price Index (TOPIX)


OBJECTIvE


STRATEGY

Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include bor-rowings for investment purposes, in the common and preferred stocks of companies located in Japan.







3 Months 1 Year 3 Years 5 Years 10 YearsInception 12/31/98

Matthews Japan Fund -17.96% -38.67% -22.46% -10.29% -2.92% 0.42%MSCI Japan Index3 -16.57% -35.89% -17.36% -5.28% -2.38% -1.19%Tokyo Stock Price Index3 -17.26% -34.59% -17.90% -6.04% -2.10% -0.82%Lipper Japanese Funds Category Average4 -18.19% -40.99% -24.00% -9.26% -2.14% -0.70%







TOP TEN HOLDINGS5


Fanuc, Ltd. Industrials 3.9%ITOCHU Corp. Industrials 3.6%Pigeon Corp. Consumer Staples 3.2%

Chuo Mitsui Trust Holdings, Inc. Financials 3.0%Daimei Telecom Engineering Corp. Industrials 3.0%Softbank Corp. Telecommunication Services 2.9%Honda Motor Co., Ltd. Consumer Discretionary 2.9%Gourmet Navigator, Inc. Information Technology 2.7%Toyota Motor Corp. Consumer Discretionary 2.5%NTT DoCoMo, Inc. Telecommunication Services 2.5%% OF ASSETS IN TOP TEN 30.2%

$10,437 Matthews Japan Fund

$8,844 MSCI Japan Index3

$9,192 Tokyo Stock Price Index3

$9,575 Lipper Japanese Funds Category Average4

12/98 3/01 3/03 3/05 3/07 3/09

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000


Industrials 24.9Financials 20.4Consumer Discretionary 15.3Information Technology 13.6Health Care 6.3Consumer Staples 5.9Telecommunication Services 5.5Energy 2.1Materials 2.1Cash and Other Assets, Less Liabilities 3.9





Matthews Japan Fund


COMMON EQuITIES: JAPAN: 96.1%

FINANCIALS: 20.4%Real Estate Investment Trusts: 14.4%United Urban Investment Corp., REIT 576 2,366,696 Japan Logistics Fund, Inc., REIT 267 1,645,722 Tokyu REIT, Inc. 304 1,621,937 Advance Residence Investment Corp., REIT 420 1,388,975 MID REIT, Inc. 789 1,349,525 Nomura Real Estate Office Fund, Inc., REIT 233 1,305,157 Global One Real Estate Investment

Corp., REIT 171 1,102,116 Premier Investment Corp., REIT 342 1,071,484 Fukuoka REIT Corp. 234 911,768 LaSalle Japan REIT, Inc. 771 791,723 BLife Investment Corp., REIT 287 696,877 Starts Proceed Investment Corp., REIT 778 515,652 Japan Hotel and Resort, Inc., REIT 401 470,443

15,238,075

Commercial Banks: 3.0%Chuo Mitsui Trust Holdings, Inc. 1,033,000 3,213,211

Capital Markets: 3.0%Monex Group, Inc. 6,524 1,587,299 GCA Savvian Group Corp. 1,306 1,571,921

3,159,220


Shares value

INDuSTRIALS: 24.9%Machinery: 13.1%Fanuc, Ltd. 60,700 $4,151,699 Aichi Corp. 619,300 2,557,922 Komatsu, Ltd. 212,900 2,356,113 Toshiba Machine Co., Ltd. 732,000 2,175,708 The Japan Steel Works, Ltd. 161,000 1,534,955 Mitsubishi Heavy Industries, Ltd. 344,000 1,052,971

13,829,368

Construction & Engineering: 3.9%Daimei Telecom Engineering Corp. 344,000 3,199,632 Toshiba Plant Systems & Services Corp. 110,000 935,061

4,134,693

Trading Companies & Distributors: 3.6%ITOCHU Corp. 781,000 3,853,472

Electrical Equipment: 2.4%The Furukawa Electric Co., Ltd. 875,000 2,506,724

Marine: 1.9%Mitsui OSK Lines, Ltd. 405,000 2,004,323


INFORMATION TECHNOLOGY: 13.6%Electronic Equipment & Instruments: 7.6%Nidec Corp. 57,400 2,583,846 Keyence Corp. 13,497 2,553,453 Kyocera Corp. 29,900 1,995,796 Murata Manufacturing Co., Ltd. 23,600 915,618

8,048,713

Software: 3.3%Nintendo Co., Ltd. 6,490 1,898,532 NSD Co., Ltd. 248,300 1,588,269

3,486,801

Internet Software & Services: 2.7%Gourmet Navigator, Inc. 1,422 2,875,881


HEALTH CARE: 6.3%Health Care Equipment & Supplies: 4.4%Sysmex Corp. 81,500 2,619,553 So-net M3, Inc. 745 2,008,400

4,627,953

Pharmaceuticals: 1.9%Tsumura & Co. 78,100 2,020,936


March 31, 2009

Shares value

CONSuMER DISCRETIONARY: 15.3%Automobiles: 7.7%Honda Motor Co., Ltd. 129,700 $3,087,608 Fuji Heavy Industries, Ltd. 718,000 2,389,680 Toyota Motor Corp. 55,400 1,759,718 Toyota Motor Corp. ADR 14,800 936,840

8,173,846 Hotels, Restaurants & Leisure: 2.1%WATAMI Co., Ltd. 63,700 1,303,211 Doutor Nichires Holdings Co., Ltd. 71,800 929,486

2,232,697 Household Durables: 1.6%Panasonic Corp. 151,000 1,666,861

Auto Components: 1.4%Stanley Electric Co., Ltd. 132,700 1,492,106

Diversified Consumer Services: 1.3%Benesse Corp. 38,300 1,410,815

Media: 1.2%Toei Co., Ltd. 277,000 1,207,277



Matthews Japan Fund


COMMON EQuITIES: JAPAN (continued)

value


(Cost $121,092,017b)


NET ASSETS: 100.0% $105,891,117


b Cost of investments is $121,092,017 and net unrealized depreciation consists of:

Gross unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . $ 2,119,540

Gross unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . (21,460,983)

Net unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . $(19,341,443)




Shares value

CONSuMER STAPLES: 5.9%Household Products: 3.2%Pigeon Corp. 134,400 $3,363,611

Food Products: 1.7%Unicharm Petcare Corp. 72,200 1,832,135

Personal Products: 1.0%Shiseido Co., Ltd. 71,000 1,040,933


TELECOMMuNICATION SERvICES: 5.5%Wireless Telecommunication Services: 5.5%Softbank Corp. 242,200 3,119,223 NTT DoCoMo, Inc. 1,964 2,675,823


March 31, 2009

ENERGY: 2.1%Oil, Gas & Consumable Fuels: 2.1%INPEX Corp. 322 2,280,369


MATERIALS: 2.1%

Chemicals: 2.1%JSR Corp. 191,700 2,255,508



Matthews Korea Fund

Portfolio Manager Commentary For the quarter ended March 31, 2009, the Matthews Korea Fund lost -5.46%, falling short of its benchmark, the Korea Composite Stock Price Index (KOSPI), which gained 1.65%.

Historically, a core strategy of the Korea Fund has been to focus on domestically oriented companies that can benefit from the growth of Korea’s economy. In recent months, howev-er, domestic consumption was negatively impacted by the global credit crisis coupled with a poor outlook for Korea’s economy. Recently, it has been the large export companies that have led the Korean market, as they benefited from the weak Korean won. While the Fund has some exposure to Korean exporters, it remains underweight relative to the benchmark. The KOSPI is heavily dominated by one large export-oriented company and this can cause short-term volatility in the benchmark. Despite the market’s current moves, we continue to believe that identifying long-term opportunities in domestically oriented businesses that can sustain their earnings and growth will benefit Fund shareholders.

The Korean equity market remained volatile during the first quarter of 2009. It continued to decline in January and February—testing last year’s low. In March, the market staged a strong recovery, ultimately finishing the quarter in positive territory. The Korean won also remained volatile, finishing the quarter down about 6%.

The Fund’s underweight positions in exporters, especially in the semiconductor industry hurt performance. The Fund’s exposure to consumer staples companies, which tend to be defensive as they provide consumers with everyday products, also detracted from performance. We remain positive about our consumer staples holdings as their business fundamentals and earnings growth remain relatively stable. However, we did trim some of these defensive positions during the quarter in order to position the Fund a bit more aggressively—adding deep cyclical companies that we believed were trading at attractive valuations. One such company, LG Display, is one of the most competitive flat panel manufacturers in the world and has been gaining share in both the notebook and television markets. LG Display has proved that it can survive during difficult times and gain market share at the same time.

Fund performance benefited from holdings in the consumer discretionary sector, which are impacted by consumer wealth and discretionary spending, as sentiment toward do-mestic consumption improved amid expectations for an economic recovery. Travel-related companies, which last year suffered from the weakening won and poor domestic outlook, performed well during the first quarter on the expectation that demand for travel will recover soon. The technology sector also performed well on the back of expectations for a recovery and overseas market share gains.

On a company basis, Samsung Electronics and Samsung Digital Imaging were the largest contributors to Fund performance for the quarter. Samsung Electronics benefited from the weakening won and expected recovery in the semiconductor industry. Samsung Digital Imaging, a spin-off from Samsung Techwin, specializes in manufacturing digital cameras and is a new holding for the Fund. The company restructured to focus solely on the camera business and benefited from expectations that it will continue to gain share in the global marketplace. The company is currently the third largest digital camera manufacturer in the world based on volume and is expected to launch new high-end models this year. We believe Samsung Digital Imaging will be competitive with its technology and continue to gain share in the global market. Samsung Fire & Marine was the most significant detractor from Fund performance for the quarter. Shares in the company held up well last year but underperformed this quarter, primarily due to profit taking. We believe that the company remains one of the best non-life insurance companies in Korea and that its management is navigating the current environment relatively well.

During the quarter, the Korean government announced additional spending plans aimed at boosting domestic confidence and growth. In addition, the country recorded a trade surplus and foreign currency reserves rose. The Korean government expects trade balances to remain in surplus this year which should ease the weakness of the won.

Looking forward, we expect volatility in the Korean market to continue in the coming months. We also expect the currency to regain strength if the global financial market stabilizes further and trade balances remain positive. We are seeing many shifts in the market driven by short-term sentiment. However, we remain focused on the long-term outlook for Korean companies and are not making short-term decisions in the portfolio.

PORTFOLIO MANAGERS

J. Michael Oh Lead Manager

Michael B. Han, CFA Co-Manager

Mark W. Headley Co-Manager

FuND FACTS

Ticker MAKOX Inception Date 1/3/95 Assets $79.9 million NAV $2.60 Total # of Positions 49


Benchmark Korea Composite Stock Price Index (KOSPI)


OBJECTIvE


STRATEGY

Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include bor-rowings for investment purposes, in the common and preferred stocks of companies located in South Korea.








1/3/95

Matthews Korea Fund -5.46% -46.42% -16.84% 1.35% 10.07% 1.13%Korean Composite Stock Price Index (KOSPI)3 1.65% -48.68% -13.74% 3.21% 6.06% -2.17%Lipper Pacific ex Japan Funds Category Average5 -1.22% -42.58% -6.29% 3.64% 7.17% 3.47%4




TOP TEN HOLDINGS6


Samsung Electronics Co., Ltd. Information Technology 8.3%Kiwoom Securities Co., Ltd. Financials 4.3%Samsung Fire & Marine Insurance Co., Ltd. Financials 4.1%KB Financial Group, Inc. Financials 4.0%NHN Corp. Information Technology 3.9%POSCO Materials 3.6%SK Telecom Co., Ltd. Telecommunication Services 3.4%Samsung Securities Co., Ltd. Financials 3.3%Hanmi Pharmaceutical Co., Ltd. Health Care 3.1%Shinhan Financial Group Co., Ltd. Financials 2.9%


$11,741 Matthews Korea Fund

$7,316 KOSPI

$17,365 Lipper Pacific ex Japan Funds Category Average4

1/95 3/01 3/03 3/05 3/07 3/093/99$0

$10,000

$20,000

$30,000

$40,000

3/97


Financials 20.5Consumer Discretionary 18.7Information Technology 18.1Consumer Staples 11.4Industrials 9.3Health Care 8.0Telecommunication Services 5.7Materials 5.7Energy 1.0Cash and Other Assets, Less Liabilities 1.6










Matthews Korea Fund


COMMON EQuITIES: SOuTH kOREA: 98.4%

Shares value

FINANCIALS: 20.5%Commercial Banks: 8.7%KB Financial Group, Inc.b 108,087 $2,614,594 Shinhan Financial Group Co., Ltd. 129,928 2,350,144 Hana Financial Group, Inc. 93,252 1,420,816 KB Financial Group, Inc. ADRb 24,639 597,496

6,983,050

Capital Markets: 7.7%Kiwoom Securities Co., Ltd. 104,171 3,449,531 Samsung Securities Co., Ltd. 63,191 2,658,372

6,107,903

Insurance: 4.1%Samsung Fire & Marine Insurance Co., Ltd. 27,879 3,246,801


CONSuMER DISCRETIONARY: 18.7%Household Durables: 4.0%LG Electronics, Inc. 25,302 1,683,415 Samsung Digital Imaging Co., Ltd.b 45,871 971,639 Intelligent Digital Integrated Security

Co., Ltd. 40,174 499,273

3,154,327

Auto Components: 3.8%Hyundai Mobis 28,134 1,633,832 Hankook Tire Co., Ltd. 143,130 1,376,998

3,010,830 Media: 3.4%Cheil Worldwide, Inc. 12,946 1,549,809 SBS Holdings Co., Ltd.c 74,030 1,201,499

2,751,308 Multiline Retail: 2.2%Hyundai Department Store Co., Ltd. 33,998 1,773,525

Hotels, Restaurants & Leisure: 1.8%Modetour Network, Inc. 126,398 1,457,738

Automobiles: 1.8%Hyundai Motor Co. 35,483 1,435,817

Diversified Consumer Services: 1.7%MegaStudy Co., Ltd. 9,456 1,375,776


INFORMATION TECHNOLOGY: 18.1%

Semiconductors & Semiconductor Equipment: 8.3%Samsung Electronics Co., Ltd. 15,973 6,599,363

Internet Software & Services: 5.8%NHN Corp.b 28,095 3,095,684 Gmarket, Inc. ADRb 94,300 1,547,463

4,643,147 Electronic Equipment & Instruments: 4.0%LG Display Co., Ltd. ADR 146,300 1,495,186 SFA Engineering Corp. 34,508 1,084,752 LG Display Co., Ltd. 29,200 595,969

3,175,907


Shares value

CONSuMER STAPLES: 11.4%Food & Staples Retailing: 5.1%Shinsegae Co., Ltd. 6,652 $2,089,200 Shinsegae Food Co., Ltd. 61,847 2,008,806

4,098,006

Personal Products: 2.2%Amorepacific Corp. 4,029 1,784,371

Beverages: 1.8%Hite Brewery Co., Ltd. 14,323 1,424,932

Food Products: 1.2%Nong Shim Co., Ltd. 6,227 970,302

Household Products: 1.1%LG Household & Health Care, Ltd. 7,948 870,048


HEALTH CARE: 8.0%Pharmaceuticals: 8.0%Hanmi Pharmaceutical Co., Ltd. 22,683 2,468,110 Yuhan Corp. 16,153 2,166,589 Daewoong Pharmaceutical Co., Ltd. 25,198 967,510 LG Life Sciences, Ltd.b 19,814 795,217


INDuSTRIALS: 9.3%Industrial Conglomerates: 3.2%Samsung Techwin Co., Ltd. 48,464 1,601,747 Orion Corp. 7,840 926,103

2,527,850 Commercial Services & Supplies: 3.1%S1 Korea Corp. 47,307 1,591,142 Korea Plant Service & Engineering Co., Ltd. 41,980 935,490

2,526,632 Construction & Engineering: 1.7%Hyundai Development Co. 54,545 1,341,284

Machinery: 1.3%JVM Co., Ltd.b 98,198 1,029,500


TELECOMMuNICATION SERvICES: 5.7%Wireless Telecommunication Services: 4.5%SK Telecom Co., Ltd. 10,409 1,447,853 SK Telecom Co., Ltd. ADR 79,500 1,228,275 KT Freetel Co., Ltd.b 44,150 885,798

3,561,926

Diversified Telecommunication Services: 1.2%KT Corp. 23,050 641,332 KT Corp. ADR 23,700 326,823

968,155


March 31, 2009


Shares value

MATERIALS: 5.7%Metals & Mining: 3.7%POSCO ADR 31,700 $2,118,511 POSCO 2,929 780,518

2,899,029 Chemicals: 2.0%LG Chem, Ltd.c 25,580 1,619,183


Matthews Korea Fund


COMMON EQuITIES: SOuTH kOREA (continued)

ENERGY: 1.0%Oil, Gas & Consumable Fuels: 1.0%GS Holdings Corp. 37,477 810,363

Total Energy 810,363

March 31, 2009

value


(Cost $98,047,963d)


NET ASSETS: 100.0% $79,850,254

a Certain securities were fair valued under the discretion of the Board of Trustees (Note 1-A).


c Security was suspended from trading on March 31, 2009.

d Cost of investments is $98,047,963 and net unrealized depreciation consists of:

Gross unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,380,262

Gross unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . (26,883,726) Net unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . $(19,503,464)





Portfolio Manager Commentary For the quarter ended March 31, 2009, the Matthews Asia Small Companies Fund gained 0.89%, while its benchmark, the MSCI All Country Asia ex Japan Small Cap Index, rose 4.50%. Our strategy continues to focus on small companies with solid capital structures and strong domestic growth profiles. Over the quarter, we continued to expand the portfolio and at quarter end the Fund had a total of 57 holdings.

Compared to the fourth quarter of 2008, market sentiment toward the small-cap universe marginally improved, as looser credit markets created a more benign borrowing environment. The Fund generally invests in companies with low leverage and strong cash flows; heading into the quarter, these companies had demonstrated resilience in weathering difficult market environments.

This quarter the Fund’s Indian holdings were challenged by qualitative factors; namely, corporate governance and transparency concerns in the Indian market. Following the scandal in December of last year surrounding one of India’s largest IT services companies, many small companies in India found themselves under heavy scrutiny by investors. Specifically, investors began to question the reliability of accounting records and expressed concerns over the pledging of company shares by promoters as collateral. This lack of confidence led to heavy sell-offs in January and February in a few of the Fund’s Indian holdings, which in combination with the Fund’s overweighting in India, was the main source of the Fund’s underperformance during the quarter. There is a silver lining: Indian regulators responded swiftly by mandating that companies disclose pledging of shares. As a result, toward the end of the quarter, we were encouraged to see some recovery in the Indian market and anticipate the restoration of investor confidence will follow over the longer term.

While recent events highlight that corporate governance is generally an issue in developing markets, we believe it is important not to make generalizations regarding the quality of individual companies, and to sell stocks on a nondiscriminatory basis as fraud and corporate scandals can happen anywhere, even in developed markets. Instead, as bottom-up fundamental investors, we aim to take these risks into consideration in our investment process and steer the portfolio accordingly. In fact, during the quarter we added to some of the Fund’s Indian holdings as valuations were extremely attractive.

The Fund’s holdings in China and Taiwan contributed the largest absolute gains—China in a more broad-based manner, and Taiwan’s contribution more concentrated in the technology space. Both markets experienced an uptick in liquidity and benefited from general optimism that China’s massive stimulus package can help induce domestic consumption and hence offset the weakness in export markets.

On a company basis, Sino-Ocean Land and Synnex Technology International contributed positively to Fund performance; both are beneficiaries of the long-term consumption trend in China. Sino-Ocean Land is one of China’s leading property developers focusing on the greater Beijing region. While the overall property market was subdued over the last 9 to 12 months, the company demonstrated the ability to act swiftly by adjusting its product mix and prices. Ultimately, it was able to generate satisfactory sales and profits in 2008. Tawian’s Synnex Technology International is a distributor of IT products in Asia Pacific. In the past few years, the company has made inroads in building out its distribution infrastructure in China. Looking ahead, the company also plans to continue to invest in relatively untapped regions within China. We believe that it should be well-positioned to benefit from the increasing demand for PCs and mobile handsets, particularly in rural areas.

We remain convinced that Asian small companies are poised to benefit from Asia’s domestic growth over the long term. We look forward to continuing our efforts to identify emerging growth opportunities in the region’s small companies and adding value for our shareholders.

PORTFOLIO MANAGERS

Lydia So Lead Manager

Noor kamruddin Co-Manager

FuND FACTS

Ticker MSMLX Inception Date 9/15/08 Assets $6.7 million NAV $7.95 Total # of Positions 57


After ContractualFee Waiver 2.00%2

Benchmark MSCI All Country Asia ex Japan Small Cap Index


OBJECTIvE


STRATEGY

Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrowings for investment purposes, in the common and preferred stocks of small companies located in Asia, excluding Japan.



2 The Advisor has contractually agreed to waive Matthews Asia Small Companies Fund’s fees and reimburse expenses until April 30, 2012 to the extent needed to limit total annual operating expenses to 2.00%. Matthews Asia Funds does not charge 12b-1 fees.


PERFORMANCE AS OF MARCH 31, 2009Annual Return, Not Annualized

3 Months Since Inception

9/15/08

Matthews Asia Small Companies Fund 0.89% -20.33%MSCI All Country Asia ex Japan Small Cap Index3 4.50% -28.30%Lipper Pacific ex Japan Funds Category Average4 -1.22% -21.57%5

The performance data does not reflect the deduction of taxes that a shareholder would pay on dividends, capital gain distributions or redemption of Fund shares. Values are in US$.






TOP TEN HOLDINGS6


Sino-Ocean Land Holdings, Ltd. China/Hong Kong 3.4%MegaStudy Co., Ltd. South Korea 3.4%Zhuzhou CSR Times Electric Co., Ltd. China/Hong Kong 3.3%Shandong Weigao Group Medical Polymer Co., Ltd. China/Hong Kong 3.2%Kiwoom Securities Co., Ltd. South Korea 2.9%St. Shine Optical Co., Ltd. Taiwan 2.9%Asian Paints, Ltd. India 2.8%Synnex Technology International Corp. Taiwan 2.7%Tat Hong Holdings, Ltd. Singapore 2.5%Richtek Technology Corp. Taiwan 2.4%



Industrials 25.5Consumer Discretionary 19.0Information Technology 15.6Financials 13.9Health Care 9.1Consumer Staples 8.2Materials 4.3Utilities 1.6


MARkET CAP ExPOSuRE (%)7,8




8 The Fund defines Small Companies as companies with market capitalization generally between $100 million and $3 billion.


China/Hong Kong 31.8India 21.2Taiwan 16.9South Korea 15.7Singapore 7.6Indonesia 2.1Malaysia 1.9

Cash and Other Assets,

Less Liabilities 2.8





Shares value

CHINA/HONG kONG: 31.8%Sino-Ocean Land Holdings, Ltd. 348,500 $229,308 Zhuzhou CSR Times Electric Co., Ltd.

H Shares 220,000 223,768 Shandong Weigao Group Medical

Polymer Co., Ltd. H Shares 120,000 213,600

New Oriental Education & TechnologyGroup, Inc. ADRb 2,750 138,188

Golden Eagle Retail Group, Ltd. 203,000 133,505 Dalian Port PDA Co., Ltd. H Shares 404,000 130,283 Ctrip.com International, Ltd. ADR 4,500 123,300

Mindray Medical International, Ltd. ADR 6,000 111,060 Minth Group, Ltd. 226,000 110,492 Towngas China Co., Ltd.b 557,000 108,823 Yip's Chemical Holdings, Ltd. 342,000 103,867 Uni-President China Holdings, Ltd.b 306,000 93,307 Vinda International Holdings, Ltd. 210,000 89,704 China Green Holdings, Ltd. 144,000 85,100 Sina China Corp.b 3,500 81,375 Kingdee International Software Group,

Co., Ltd. 604,000 78,149 Times, Ltd. 358,000 77,871


INDIA: 21.2%Asian Paints, Ltd. 11,952 186,055 CRISIL, Ltd. 2,725 145,696 Container Corp. of India, Ltd. 9,836 139,301 Dabur India, Ltd. 65,954 129,302 Sintex Industries, Ltd. 57,533 111,176 Jain Irrigation Systems, Ltd. 15,824 106,628 India Infoline, Ltd. 86,254 100,079 Kotak Mahindra Bank, Ltd. 16,151 90,266 Glenmark Pharmaceuticals, Ltd.b 29,017 90,228 ICSA India, Ltd. 51,070 88,596 Rolta India, Ltd. 71,852 81,560 Sun TV Network, Ltd. 22,320 73,820 HT Media, Ltd. 34,809 40,139 Unitech, Ltd. 57,801 40,001


TAIWAN: 16.9%St. Shine Optical Co., Ltd. 53,000 194,832 Synnex Technology International Corp. 143,000 181,092 Richtek Technology Corp. 34,000 160,651 Formosa International Hotels Corp. 13,000 129,493 Shin Zu Shing Co., Ltd. 34,000 118,455 Everlight Electronic Co., Ltd. 64,000 117,893 Zinwell Corp. 72,000 99,989 Chroma ATE, Inc. 92,000 67,438 104 Corp. 32,000 64,716


Shares value

SOuTH kOREA : 15.7%MegaStudy Co., Ltd. 1,569 $228,277 Kiwoom Securities Co., Ltd. 5,957 197,261 Korea Plant Service & Engineering Co., Ltd. 5,740 127,911 NICE e-Banking Services Co., Ltd. 46,466 114,408 Gmarket, Inc. ADRb 6,900 113,229 Hankook Tire Co., Ltd. 11,410 109,771 Modetour Network, Inc. 7,704 88,850 SFA Engineering Corp. 2,334 73,369


SINGAPORE: 7.6%Tat Hong Holdings, Ltd. 406,000 166,239 Keppel Land, Ltd. 137,000 130,790 Singapore Airport Terminal Services, Ltd. 143,000 114,143 Armstrong Industrial Corp., Ltd. 1,102,000 86,794 Goodpack, Ltd. 35,000 15,217

Total Singapore 513,183

INDONESIA: 2.1%PT Bisi Internationalb 569,000 76,645 PT Jasa Marga 819,000 63,891

Total Indonesia 140,536

March 31, 2009


(Cost $6,569,978c)

CASH AND OTHER ASSETS, LESS LIABILITIES: 2.8% 187,589

NET ASSETS: 100.0% $6,709,024




Gross unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . $396,417

Gross unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . (444,960)

Net unrealized depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(48,543)


BHD Berhad


MALAYSIA: 1.9%Riverstone Holdings, Ltd. 202,000 63,686 JobStreet Corp. BHD 230,000 61,848

Total Malaysia 125,534



Portfolio Manager Commentary For the quarter ended March 31, 2009, the Matthews Asian Technology Fund fell -0.64%, outperforming its benchmark, the MSCI/Matthews Asian Technology Index, which lost -5.18%.

It was a very volatile quarter for Asian technology stocks. The sector declined sharply during the first two months of the year then staged a rebound in March. On a relative basis, Asian technology stocks underperformed their U.S. counterparts primarily due to weak currencies across the region, especially in Korea, Japan and India. The weakness in the Korean won and Indian rupee that began last year continued in the first quarter due to the ongoing global credit crunch and foreign selling pressure in these domestic markets. The Japanese yen, which strengthened last year as investors sought a safe haven, depreciated during the quarter due to a worsening domestic economy and stabilizing global financial market.

While the core strategy of the Fund—which is to find Asian technology companies that will benefit from the growth in regional consumption or the global IT outsourcing trend—remained unchanged, we repositioned the portfolio at the beginning of the year to take advantage of historically low valuations. Specifically, we increased our exposure to Taiwan by increasing our positions in existing holdings and adding new companies. These changes benefited Fund performance during the quarter, as did our positions in Korean companies. We kept our core holdings largely unchanged and reduced our exposure to non-core holdings in the pharmaceutical and media sectors. While the Fund’s underweight positions in Japan and telecoms hurt performance last year, they helped performance in the first quarter.

The technology hardware and equipment and semiconductor sectors were among the top performing sectors in the first quarter. An improved outlook for demand and the easing of the global financial crisis contributed to the strong performance of these sectors. Ongoing consolidation in the Dynamic Random Access Memory (DRAM) industry and rising memory prices also contributed to the performance of the semiconductor sector. During the quarter, the Taiwanese government an-nounced a plan to form a new company—Taiwan Memory Co. (TMC)—to consoli-date Taiwan’s DRAM industry. TMC is expected to form a joint venture with either a Japanese or U.S. DRAM company to gain access to the advanced technologies needed to be competitive.

Internet companies have always played a key role in the Fund’s strategy as we believe they will be a beneficiary of ongoing consumption growth in the region. Baidu, which operates China’s largest online search website and also offers a variety of other Internet services, was the most significant contributor to Fund performance for the quarter. The company benefited from optimism that, aided by the Chinese government’s spending plans, China’s economy will recover faster than others. The company is also capitalizing on China’s growing Internet user base. According to the country’s official online research agency, China Internet Network Information Center, China had more than 290 million Internet users last year—the largest user base in the world. Last year, when many of the Fund’s holdings in the Internet sector were under stress, we continued to believe that Baidu was in a strong position to benefit from the ongoing growth of the Chinese Internet sector. Baidu remained one of the Fund’s largest holdings and this benefited Fund performance this quarter.

India-based IT services company, Rolta, was the Fund’s worst performer for the quarter. Rolta was hurt by the overall weakness in India’s small-cap space which stemmed from both the ongoing credit crisis and fallout from the scandal late last year surrounding one of India’s largest IT services companies. Most recently, the company’s fundamentals have been sound and its core business has remained steady. In fact, during the quarter we added to our existing position in Rolta as its valuation was attractive.

Looking ahead, we expect the Asian technology sector to remain volatile as demand remains weak; however, as the global financial crisis continues to ease, the outlook for Asian technology companies should improve steadily.

PORTFOLIO MANAGERS

J. Michael Oh Lead Manager

Lydia So Co-Manager

FuND FACTS

Ticker MATFX Inception Date 12/27/99 Assets $67.7 million NAV $4.68 Total # of Positions 52


Benchmark MSCI/Matthews Asian Technology Index


OBJECTIvE


STRATEGY

Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its total net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies located in Asia that derive more than 50% of their revenues from the sale of products or services in technology-related industries and services.





TOP TEN HOLDINGS6


Samsung Electronics Co., Ltd. South Korea 4.3%Baidu.com, Inc. China/Hong Kong 4.3%Taiwan Semiconductor Manufacturing Co., Ltd. Taiwan 4.0%NHN Corp. South Korea 3.4%China Mobile, Ltd. China/Hong Kong 3.2%Cannon, Inc. Japan 3.1%Nintendo Co., Ltd. Japan 3.1%MediaTek, Inc. Taiwan 2.6%ZTE Corp. China/Hong Kong 2.5%Hon Hai Precision Industry Co., Ltd. Taiwan 2.5%


PERFORMANCE AS OF MARCH 31, 2009Average Annual Total Return

3 Months 1 Year 3 Years 5 Years Since Inception

12/27/99

Matthews Asian Technology Fund -0.64% -43.00% -12.85% -2.27% -7.33%MSCI/Matthews Asian Technology Index3 -5.18% -37.21% -11.32% -4.15% -10.69%4

Lipper Science and Technology Funds Category Average5 4.15% -35.73% -14.19% -5.68% -10.48%4



$4,943 Matthews Asian Technology Fund

$3,512 MSCI/Matthews Asian Technology Index3,4

$3,660 Lipper Science and Technology Funds Category Average4,5

12/99 3/01 3/05 3/07 3/093/03$0

$5,000

$10,000

$15,000


Information Technology 66.3Telecommunication Services 17.3Consumer Discretionary 9.1Industrials 3.8Health Care 2.8Cash and Other Assets,Less Liabilities 0.7


Large Cap (over $5B) 57.7Mid Cap ($1B–$5B) 25.8Small Cap (under $1B) 14.0Cash and Other Assets,Less Liabilities 0.7



China/Hong Kong 28.1Japan 21.0South Korea 19.4Taiwan 19.0India 6.4Indonesia 2.1Philippines 1.9Thailand 1.4Cash and Other Assets,Less Liabilities 0.7










Shares value

CHINA/HONG kONG: 28.1%Baidu, Inc. ADRb 16,400 $2,896,240 China Mobile, Ltd. ADR 50,500 2,197,760 ZTE Corp. H Shares 419,400 1,709,522 Kingdee International Software Group

Co., Ltd. 11,940,000 1,544,861 New Oriental Education & Technology

Group, Inc. ADRb 29,800 1,497,450 Ctrip.com International, Ltd. ADR 53,200 1,457,680 Tencent Holdings, Ltd. 192,800 1,426,643 China Communications Services Corp.,

Ltd. H Shares 2,030,000 1,214,050 Mindray Medical International, Ltd. ADR 62,900 1,164,279 Sohu.com, Inc.b 27,700 1,144,287 ASM Pacific Technology, Ltd. 304,300 1,066,005 Lenovo Group, Ltd. 4,506,000 1,035,680 Perfect World Co., Ltd. ADRb 45,724 642,422


JAPAN: 21.0%Canon, Inc. 72,400 2,110,592 Nintendo Co., Ltd. 7,085 2,072,588 Fanuc, Ltd. 22,100 1,511,574 Keyence Corp. 6,380 1,207,011 Rakuten, Inc. 2,076 999,089 Murata Manufacturing Co., Ltd. 24,600 954,415 Nikon Corp. 81,000 921,868 Tokyo Electron, Ltd. 24,200 906,380 Softbank Corp. 62,100 799,768 HOYA Corp. 39,100 778,151 Ibiden Co., Ltd. 27,200 665,339 Sumco Corp. 44,500 662,953 Nidec Corp. 14,500 652,714


SOuTH kOREA: 19.4%Samsung Electronics Co., Ltd. 7,107 2,936,310 NHN Corp.b 20,778 2,289,451 LG Display Co., Ltd. ADR 130,600 1,334,732 Gmarket, Inc. ADRb 80,100 1,314,441 MegaStudy Co., Ltd. 8,741 1,271,749 SK Telecom Co., Ltd. ADR 81,900 1,265,355 JVM Co., Ltd.b 102,913 1,078,932 SFA Engineering Corp. 26,515 833,493 Hynix Semiconductor, Inc.b 86,962 782,946


Shares value


Co., Ltd. 1,815,854 $2,734,406 MediaTek, Inc. 188,789 1,777,198 Hon Hai Precision Industry Co., Ltd. 736,550 1,666,665 Richtek Technology Corp. 288,000 1,360,811 HTC Corp. 101,000 1,243,612 Chunghwa Telecom Co., Ltd. 668,853 1,219,736 Synnex Technology International Corp. 956,000 1,210,657 Acer, Inc. 478,000 719,764 Wistron Corp. 505,000 544,684 Quanta Computer, Inc. 305,000 385,439


INDIA: 6.4%Infosys Technologies, Ltd. 60,866 1,595,715 Bharti Airtel, Ltd.b 107,557 1,331,097 Glenmark Pharmaceuticals, Ltd.b 242,817 755,032 Rolta India, Ltd. 583,343 662,158


INDONESIA: 2.1%PT Telekomunikasi Indonesia ADR 54,000 1,387,800


PHILIPPINES: 1.9%Globe Telecom, Inc. 76,230 1,318,758

Total Philippines 1,318,758

March 31, 2009


(Cost $83,107,362c)

CASH AND OTHER ASSETS, LESS LIABILITIES: 0.7% 507,566

NET ASSETS: 100.0% $67,721,675




Gross unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . $4,461,185





THAILAND: 1.4%Advanced Info Service Public Co., Ltd. 408,800 953,847

Total Thailand 953,847


Notes to Schedules of Investments (Unaudited)

A. SECURITY VALUATION: The Funds’ equity securities are valued based on market quotations, or at fair value as determined in good faith by or under the direction of the Board of Trustees (the “Board”) when no market quotations are available or when market quotations have become unreliable. Securities that trade in over-the-counter markets, including most debt securities (bonds), may be valued using indicative bid and ask quotations from bond dealers or market makers, or other available market information, or on their fair value as determined by or under the direction of the Board. The Board has delegated the responsibility of making fair value determinations to the Funds’ Valuation Committee (the “Valuation Committee”), subject to the Funds’ Pricing Policies. When fair value pricing is employed, the prices of securities used by a Fund to calculate its NAV differ from any quoted or published prices for the same securities for that day. All fair value determinations are made subject to the Board’s oversight.

The books and records of the Funds are maintained in U.S. dollars. Transactions, portfolio securities, and assets and liabilities denominated in a foreign currency are translated and recorded in U.S. dollars at the prevailing exchange rate as of the close of trading on the New York Stock Exchange (“NYSE”). Translation gains or losses resulting from changes in the exchange rate during the reporting period and realized gains and losses on the settlement of foreign currency transac-tions are reported in the results of operations for the current period. The Funds do not isolate that portion of gains and losses on investments in equity securities that is due to changes in foreign exchange rate from that which is due to changes in market prices of equity securities.

Market values for equity securities are determined based on quotations from the principal (or most advantageous) market on which the security is traded. Market quotations used by the Funds include last reported sale prices, or, if such prices are not reported or available, bid and asked prices. Securities are valued through valuations obtained from a commercial pricing service or by investment dealers in accordance with procedures established by the Board.

Events affecting the value of foreign investments occur between the time at which they are determined and the close of trading on the NYSE. If the Funds believe that such events render market quotations unreliable, and the impact of such events can be reasonably determined, the investments will be valued at their fair value. The fair value of a security held by the Funds may be determined using the services of third-party pricing services retained by the Funds or by the Valuation Committee, in either case subject to the Board’s oversight.

Foreign securities held by the Funds may be traded on days and at times when the NYSE is closed. Accordingly, the NAV of the Funds may be significantly affected on days when shareholders have no access to the Funds.

B. FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 157 “FAIR VALUE MEASUREMENTS” (“SFAS No. 157”): SFAS No. 157 clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires disclosures about the use of fair value measure-ments. The three levels of the fair value hierarchy under SFAS No. 157 are described below:

Level 1: Quoted prices in active markets for identical securities

Level 2: Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3: Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

As of March 31, 2009, Level 3 Securities consist of convertible bonds that trade in over the counter markets. As described in Note A, these securities are valued using indicative bid and ask quotations from bond dealers and market makers, or on their fair value as determined under the direction of the Board. Indicative quotations and other information used by the Funds may not always be directly observable in the marketplace due to the nature of these markets and the manner of execution. These inputs, the methodology used for valuing such securities, and the characterization of such securities as Level 3 Securities are not necessarily an indication of liquidity, or the risk associated with investing in these securities.

The summary of inputs used to determine the fair valuation of the Fund’s investments as of March 31, 2009 is as follows:

Matthews Asian

Growth and Income Fund




Matthews China Fund

Level 1 : Quoted Prices Fund $83,808,112 $8,356,757 $4,840,761 $101,684,695 $99,263,212

Level 2 : Other Significant Observable Inputs 599,938,739 94,698,852 135,070,106 1,023,612,915 741,210,612

Level 3 : Significant Unobservable Inputs 359,701,049 1,826,983 — — —

Total Market Value of Investments $1,043,447,901 $104,882,592 $139,910,867 $1,125,297,610 $840,473,824


Post October Capital Losses Post October Currency Losses

Matthews Asian Growth and Income Fund $27,273,299 —

Matthews Asia Pacific Equity Income Fund 3,795,549 —

Matthews Asia Pacific Fund 19,533,406 —

Matthews Pacific Tiger Fund 172,123,650 —

Matthews China Fund 15,795,511 —

Matthews India Fund 44,921,286 —

Matthews Japan Fund 16,453,559 —

Matthews Korea Fund 834,632 —

Matthews Asia Small Companies Fund 47,978 $963

Matthews Asian Technology Fund 5,094,779 —

Matthews India Fund

Matthews Japan Fund

Matthews korea Fund

Matthews Asia Small

Companies FundMatthews Asian

Technology Fund

Level 1 : Quoted Prices $16,588,532 $936,840 $9,486,892 $567,152 $16,302,446

Level 2 : Other Significant Observable Inputs 235,575,936 100,813,734 69,057,607 5,954,283 50,911,663

Level 3 : Significant Unobservable Inputs 12,384,465 — — — —

Total Market Value of Investments $264,548,933 $101,750,574 $78,544,499 $6,521,435 $67,214,109

Matthews Asian Growth and

Income Fund


Matthews India Fund

Balance as of December 31, 2008 (market value) $368,908,419 $2,803,227 $15,405,773

Accrued discounts/premiums 4,673,575 43,547 635,023

Realized gain/(loss) (4,274,683) 136,018 (314,136)

Change in unrealized appreciation/(depreciation) 18,769,682 (252,269) (216,105)

Net purchases/(sales) (28,375,944) (903,540) (3,126,090)

Balance as of March 31, 2009 (market value) $359,701,049 $1,826,983 $12,384,465

Net change in unrealized appreciation/depreciation on Level 3 investments held as of March 31, 2009 $18,769,682 $(252,269) $(94,597)

Following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

C. TAX INFORMATION: Under current tax law, capital and currency losses realized after October 31 and prior to the Fund’s fiscal year end may be deferred as occurring on the first day of the following fiscal year. Post October losses at fiscal year end December 31, 2008 were as follows:

LOSS DEFERRED ExPIRING IN: 2009 2010 2016 Total

Matthews Asia Pacific Equity Income Fund $— $— $1,466,788 $1,466,788

Matthews Asia Pacific Fund — — 24,090,517 24,090,517

Matthews Japan Fund — — 36,495,378 36,495,378

Matthews Asia Small Companies Fund — — 7,715 7,715

Matthews Asian Technology Fund 5,967,059 3,461,198 17,493,413 26,921,670

For federal income tax purposes, the Funds indicated below have capital loss carryforwards, expiring in the year indicated, as of December 31, 2008, which are available to offset future capital gains, if any:

For additional information regarding the accounting policies of the Matthews Asia Funds, refer to the most recent financial Statements in the N-CSR filing at www.sec.gov.


Disclosures and Index DefinitionsDisclosures

Fund Holdings: The Fund holdings shown in this report are as of March 31, 2009. Holdings are subject to change at any time, so holdings shown in this report may not reflect current Fund holdings. The Funds file complete schedules of portfolio holdings with the Securities and Exchange Com-mission (the “SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Form N-Q is filed with the SEC within 60 days of the end of the quarter to which it relates, and is available on the SEC’s website at www.sec.gov. It may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.

Proxy Voting Record: The Funds’ Statement of Additional Information containing a description of the policies and procedures that the Funds have used to vote proxies relating to portfolio securities, along with each Fund’s proxy voting record relating to portfolio securities held during the 12-month period ended June 30, 2008, is available upon request, at no charge, at the Funds’ website at matthewsasia.com or by calling 1.800.789.ASIA (2742), or on the SEC’s website at www.sec.gov.

Shareholder Reports and Prospectuses: To reduce the Funds’ expenses, we try to identify related shareholders in a household and send only one copy of the Funds’ prospectus and financial reports to that address. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. At any time you may view the Funds’ current prospectus and financial reports on our website. If you prefer to receive individual copies of the Funds’ prospectus or financial reports, please call us at 1.800.789.ASIA (2742).

Index Definitions

The MSCI All Country Asia ex Japan Index is a free float–adjusted market capitalization–weighted index of the stock of markets of China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.

The MSCI All Country Far East ex Japan Index is a free float–adjusted market capitalization–weighted index of the stock markets of China, Hong Kong, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.

The MSCI All Country Asia Pacific Index is a free float–adjusted market capitalization–weighted index of the stock markets of Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan and Thailand.

The MSCI China Index is a free float–adjusted market capi-talization–weighted index of Chinese equities that includes China-affiliated corporations and H shares listed on the Hong Kong Exchange, and B shares listed on the Shanghai and Shenzhen exchanges.

The Bombay Stock Exchange 100 (BSE 100) Index is a free float–adjusted market capitalization–weighted index of the 100 stocks listed on the Bombay Stock Exchange.

The MSCI Japan Index is a free float–adjusted market capitalization–weighted index of Japanese equities listed in Japan.

The Tokyo Stock Price Index (TOPIX) is a market capitalization–weighted index of all companies listed on the First Section of the Tokyo Stock Exchange.

The Korea Composite Stock Price Index (KOSPI) is a market capitalization–weighted index of all common stocks listed on the Korea Stock Exchange.

The MSCI All Country Asia ex Japan Small Cap Index is a free float–adjusted market capitalization–weighted small cap index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.

The MSCI/Matthews Asian Technology Index is a free float–adjusted market capitalization–weighted index of Asian equities tracking a broad range of technology stocks including semiconductor equipment and products, commu-nications equipment, computers and peripherals, electronic equipment and instruments, office electronics, software, IT consulting and services, Internet software and services, diversified telecommunications services, and wireless tele-communications services.


Matthews Asia FundsBOARD OF TRuSTEES

Independent Trustees: Geoffrey H. Bobroff, Chairman Rhoda Rossman Toshi Shibano Jonathan Zeschin

Interested Trustee:1 G. Paul Matthews

OFFICERS William J. Hackett Shai A. Malka John P. McGowan Manoj K. Pombra

INvESTMENT ADvISORMatthews International Capital Management, LLCFour Embarcadero Center, Suite 550San Francisco, CA 94111800.789.ASIA (2742)

ACCOuNT SERvICESPNC Global Investment Servicing (U.S.) Inc. P.O. Box 9791Providence, RI 02940800.789.ASIA (2742)

1As defined under the Investment Company Act of 1940, as amended.

P.O. Box 9791 | Providence, RI 02940 | matthewsasia.com | 800.789.ASIA (2742)

QR_0309_130M©2009 Matthews International Capital Management, LLC

Quarter Report q1 2009

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